Lifecorp Summit Presentation Nov 15 (show)

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How to maximise your wealth through Property Investment and Getting the Structure Right

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Presentation Transcript

Slide1:

Bevan Pierce B Com, PG Cert (Prop) Complete Business Strategies [email protected] Ph: (07) 5439 1600 Because: Buying the Perfect Property is Only Half of the Story This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire.

Slide2:

Buying Decisions Research Research Research… Selling Outcomes Structure Exit Strategy “an investment in knowledge always pays the best interest.” Benjamin Franklin “What if?” This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire.

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Case Study (Typical Situation) Cost $340,000 at LVR 100% But - What happens on the Sale? Sale Price $640,000 This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. Tax savings over 10 years up to $ 60,000 Net tax saving MINUS $ 10,000

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What If? 1. We Could Change the Ownership for the Sale? This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. 2 . Dad takes an income cut AND Mum gets a pay increase? 3. My SMSF Owned the property? What Options do you Have?

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This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. Dad takes an income cut AND Mum gets a pay increase? Can We Do Anything About It? Tax savings reduce from $7,224 to $3,749 = $135/fn less family money Tax savings reduce from $7,224 to only $7,198 $0.50 per fortnight – only one coffee upsize!! “We Can Do??”

Slide6:

“Yes We Can” This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. Can we give Mum more of the Capital Gain? Tax payable reduces from $69,795 to $49,147 What About Capital Gains Tax?

Slide7:

This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. How to Rewrite History? Everybody’s circumstances are different. This is not advice but general information and should not be relied upon. The Income Tax laws contain provisions for restructuring ownership of property in some circumstances. As an example: On separation or divorce, couples can reallocate property per a financial settlement. This allows the cost base of a capital asset to pass through to the person receiving the property along with the lifetime capital gain for that asset. What About Stamp Duty?

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This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. More Deductions Means Less Tax Tax deductible costs (Reduce annual tax payable) Rates, interest, management fees, insurance etc Interest and costs on land before construction Reasonable travel to inspect the property Training costs (maybe?) Body corp (Note special purpose funds) Depreciable costs (Generally depreciated over time) Depreciation (including Capital works) Borrowing costs (amortise over 5 years) Mortgage insurance (amortise over 5 years) Upgrades and renovation costs (turn 3 bedrooms into 4) Capital Costs (Reduce capital gain on sale) Land Holding costs (if property is not available to rent or being used privately) Sale and purchase costs – Agents commission for example Stamp duty Private costs (No tax effect) Any costs relating to your own use Costs of looking for a property NRAS (NANE income)

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This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. Any Questions? Before the smurf stuff…..

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This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. Property in SMSF using LRBA What Options do you Have? SMSF’s can pay 0% tax on capital gains and other income. The banks are making it harder for SMSF’s to borrow funds. The regulations are complex and you will need licensed financial advice. Compliance costs can become expensive. Borrowing does not have to be from the bank. Own the property outside super BUT use your super funds to pay for the deposit. It is not simple but a Joint Venture is one alternative option.

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This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. What is a Joint Venture? In its simplest form a Joint Venture (“JV”) is a contractual arrangement between one or more persons. A Joint Venture is not a partnership nor is it a trust but it may exhibit characteristics of each. For example: A JV is not a legal person and cannot therefore be sued. A JV is not bound by income streaming rules related to trusts. A JV does not pay tax – but may collect and pay GST. A JV can be incorporated, but does not have to be. It is defined by a Joint Venture Agreement which contains the terms each of the Joint Venturer’s agree.

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This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. How Does it Work? SMSF $ $ $ 255,000 75% LVR 85,000 (25%)

Slide13:

This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. Do the Numbers Stack Up? Tax savings over 10 years up to $ 65,000 But - What happens on the Sale? Sale Price $640,000 Net tax saving $ 16,143 $26,409* $13,500*

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This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. Some Common Questions Is it legal? Yes. Everything I have discussed is allowed in the law and regulations at the moment BUT things may change in the future. Do I need a financial adviser? Most probably but especially so if you are using an LRBA. What are the practical steps to set up an SMSF for property? Establish your SMSF – say 1 Week Rollover of super funds – say 2 – 12 weeks Establish the bare trust when property located – say 1 week Finalise finance and due diligence – say 28 days Settlement How much does it cost? Establish an SMSF with a corporate trustee = $1,200 - $4,000+ Establish a bare trust with corporate trustee = $506 - $2,000+ Legal advice re a JV arrangement $4,000 to $8,000+ Legal advice regarding property agreements $4,000 to $8,000+ Financial planning advice = $4,400 to $10,000+

Slide15:

This is general information only and should not be relied upon. All scenario’s are fictitious and rely on assumptions regarding future events that may or may not transpire. Any Questions? Other resources: CD to take away with copies of rulings, presentation, SMSF forms and other information ATO Website ( www.ato.gov.au ) Call me (07) 5439 1600 Talk to Phil or your Lifecorp adviser

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