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SMSF – 10 things for the ATO to improve

SMSF for property investment

The benefits of Self Managed Super Funds are becoming widely understood,  Property investors have been drawn to SMSF’s on the basis that you are now entitled to borrow to buy property.  This is a great advance and has created a big opportunity for people to build their property portfolio.  Ken Raiss from the accounting firm Chan & Naylor Accountants, outlines the top 10 rules that the ATO needs to consider to make SMSF’s even more useful.

Amid increasing pressure on trustees of self-managed super funds (SMSFs) to keep pace with the steady stream of quiet pronouncements from the ATO, we turn the spotlight on some overlooked SMSF guidelines in need of urgent reform in 2013.

SMSF for property investmentAs a relatively young but rapidly evolving model, SMSF compliance guidelines contain more than their fair share of unnecessary and arbitrary rules. Some of these are discriminatory, lack logic or simply make the process of providing for independent retirement unnecessarily difficult.

Chan & Naylor has compiled the following list of 10 SMSF rules that themselves either require retirement or modification.

The ATO must broaden the net of reform to ensure arbitrary SMSF ruling is afforded urgent review and the best interests of Australian investors are put first.

 1) An SMSF must have no more than four members.

SMSFs are most often used to provide for retirement income for all family members, yet four trustee positions would not be enough to cater for the average Australian household. The figure should respond to the nation’s needs as opposed to forcing families to either leave family members out of the SMSF or pay to set up an additional fund.

2) An SMSF cannot borrow money to pay for improvements to a single acquirable asset.

Should a trustee require money to renovate a property, it cannot be loaned in an SMSF because it is considered to increase risk, though trustees are still allowed to borrow money to purchase that property or asset in an SMSF.

3) A person must pay to set up separate holding trusts per single acquirable asset with debt.

Instead of adding acquirable assets with debt into the same trust structure, trustees must pay to set up another.

4) Life insurance (which is tax-deductable in super) cannot be moved from an individual name to a self-managed superfund unless the existing policy is cancelled and reissued.

Those who experience a change in circumstances while doing so, such as entering a new age group or different health, could find their new policy does not provide the same cover as their previous insurance policy, or worse still, cannot be re-written.

5) If a person is insured in super, they can only claim tax deductions for TDP (total and permanent disability) provided they are unable to work in any occupation.

This should also apply for a person’s own occupation.

6) It is prohibited to buy residential property or unlisted shares through an SMSF from a related party (wife, family member, etc.), even if supported with a registered valuation.

It is, however, acceptable to do the same with commercial property or shares. As long as the sole purpose test is passed there should be no limitation on from whom the asset is purchased if executed at arm’s length.

7) After the age of 65, a trustee is no longer entitled to the three-year average contribution.

This is age discriminatory. Anybody should be able to benefit from the three-year average contribution entitlement regardless of age.

8) Once a trustee reaches the age of 75, he or she may no longer contribute the full super contribution limit of $25,000 per annum.

This rule is discriminatory, especially as more Australians are both living and working for longer.

9) SMSFs must pay for manual amendments with each change to the SIS Act.

However, the big superfunds, covered by their associations, adopt legislation changes automatically. An SMSF deed, through legislation, should automatically pick up any changes to the SIS Act.

10) Trustees can suffer destructive penalties of up to 93% on over-contributions.

Excessive penalties should be axed for genuine errors.

 So if you would like more information about SMSF or how to take advantage of them for your Property Investments, you can contact out Accounting experts here.
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Finance

Budget 2021: Queensland Invests $1bn in Housing Fund

Queensland

The Queensland government plans to establish a $1 billion housing investment fund according to its 2021-22 budget.

The fund is expected to generate $160 million in four years which will be used to “drive new supply to support current and future housing needs”.

The budget detailed further investment in social housing including $1.8 billion to increase the supply of social housing over four years with $30 million to be spent on fast-tracking these projects this year alone.

This funding along with hospital expansions, new schools in rapid growth areas, infrastructure and a hydrogen feasibility study were some of the key highlights in the state budget.

Queensland Treasurer Cameron Dick said the budget highlighted the state’s success in managing Covid and plans for future growth to cope with new residents.

“It is no surprise that more Australians are flocking to Queensland,” Dick said.

“Our state received 30,000 net interstate migrants in 2020, and we are expecting another 85,000 Australians—the equivalent of a city the size of Rockhampton—to call Queensland home over the next four years.

“Meaning our growing state will need more and better roads, schools, hospitals and support programs.”

Queensland

▲ Planning is under way on the satellite hospitals which aim to free up capacity in acute hospitals and provide virtual health opportunities. 

There would be $177 million spent in Springfield to create a new public hospital, while the Caboolture Hospital redevelopment would get $103.5 million, $92.4 million was allocated for expanding Ipswich Hospital and $90 million for Logan Hospital.

A further $265 million would be spent delivering satellite hospitals in Bribie Island, Caboolture, Brisbane South, Pine Rivers, Gold Coast, Ipswich and Redlands.

The new schools opening 2023 would be located in Yarrabilba, Ripley, Augustine Heights and Palmview. Six more schools would open in 2024 at Redland Bay, Bellbird Park, Springfield, Collingwood Park two in Logan Reserve.

Infrastructure funding was also on the cards for Bruce Highway upgrades and $1.044bn to extend Gold Coast Light Rail to Burleigh as well as $1.5bn further funding for the Cross River Rail.

 

Article Source: www.theurbandeveloper.com

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Developments

Luxury focus as Sammut, Alceon plan $750m of developments

Sammut

A joint venture with Alceon Group has supercharged the pipeline of Sydney developer Sammut Group, including a $350 million plan to transform the Cronulla CBD in the city’s southern beach suburbs.

The mixed-used urban renewal project, known as Vue, will cover more than 5000 square metres after Sammut Group was able to pull off a complex site aggregation that cost more than $100 million.

Sammut Group director Allen Sammut said negotiations took a year, encompassing 24 stakeholders across nine properties .

“In the past 15 years there’s probably been half a dozen developers try to put the site together through various schemes, but no one has been able to fully secure every single tenant and landlord there,” said Mr Sammut.

“It was quite a diverse range of negotiations and because they’ve been approached so many times, obviously expectations were always high. I would put it down to local knowledge and a one-on-one approach.

“Even though the negotiations were painful and quite trying at times we were finally able to get there.”

It is the third project Sammut Group and Alceon have partnered on – two in Cronulla and one on the Gold Coast – and a fourth is on the way.

Mr Sammut said the partnership had been a game changer for the business, founded by his father 50 year ago, which specialises in luxury apartment and mixed-used developments around the Cronulla area.

“We’ve formed a great bond with Alceon and probably have about $750 million worth of projects under way,” he said.

They are Vue, another nearby development called Parc, and the company’s first interstate project – Coast, a 35-level apartment building at Surfers Paradise in south-east Queensland.

All are in various stages of planning, while the final project with Alceon, back in Cronulla, is on the verge of being finalised.

Sammut Group now had the financial firepower and the ability to grow beyond its Cronulla roots into new markets, Mr Sammut said.

Its first foray outside NSW, the $200 million Coast project at 43 Garfield Terrace, Surfers Paradise, had been an immediate success.

More than 70 per cent of the 43 apartments have pre-commitments at prices of between $3.5 million and $9 million, even though development (DA) approval is still pending.

The sales were achieved in just three weeks, a reflection of the extremely strong Gold Coast apartment market.

In Cronulla, a development application has also been lodged for Vue, on The Kingsway next to Northies Hotel.

Vue includes 112 apartments, plus commercial and retail space featuring flagship launch tenant Harris Farm Markets, which will open its biggest store in Sydney on the site.

Looking forward, Mr Sammut said the company would target lifestyle destinations “anywhere along the eastern seaboard” that are in the sights of cashed-up downsizers.

 

Article Source: www.afr.co

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Finance

RBA keeps interest rates at record low of 0.1% as housing prices hit record highs

The reserve bank has continued to hold interest rates at a record low of 0.1% as house prices across Australia keep rising.

The national housing market rose 2.2% in May, according to the latest data from CoreLogic, following on from a 1.8% rise in April and a 32-year record rise in March of 2.8%.

In Sydney prices rose 3% in May alone, and prices are now up 9.5% in only the past three months (March-May).

They rose 8.5% in the first three months of 2021 – the largest quarterly rise since records began. The median house price in Sydney is now $970,355.

Prices have reached record highs even though borders have been closed for more than a year and immigration halted, with the boom fuelled largely by Australian buyers with improved savings and low interest rates.

Tim Lawless, the research director of CoreLogic, said housing values were up “across every capital city over the month, with both house and unit values lifting across the board”.

He said soaring prices were due to “the combination of improving economic conditions and low interest rates”.

“At the same time, advertised supply remains well below average,” he said. “This imbalance between demand and supply is continuing to create urgency amongst buyers, contributing to the upwards pressure on housing prices.”

RBA

According to CoreLogic, the number of homes listed for sale nationally is 24% below the five-year average.

And even as supply picks up, continuing high demand means that sales still exceed supply.

“The sales-to-new listings ratio remains around 1.1, meaning for every new listing there is more than one sale occurring,” Lawless said. “This rapid rate of absorption is keeping advertised inventory levels extremely low, despite the rise in new listings. As a consequence, vendors remain in a strong selling position while buyers have a weak position at the negotiation table.”

Prices rose 3.2% in Hobart over the past month, 3% in Sydney, 2.7% in Darwin, 2% in Brisbane, 1.9% in Adelaide, 1.8% in Melbourne and 1.7% in Canberra,

The combined capital city prices rose 2.3%. Prices in combined regional areas rose 2%. Out of 334 subregions analysed by Corelogic, 97% recorded a house price rise.

“Such a synchronised upswing is an absolute rarity across Australia’s diverse array of housing markets,” Lawless said.

The CoreLogic report also found that “worsening affordability pressures are likely to impact first homebuyers more than other segments of the market” and “there are already signs that first homebuyer demand is pulling back”.

“Investors, on the other hand, are stepping up their activity across the housing market, motivated by prospects for continued capital gain and low interest rates,” CoreLogic said.

Over the past year, house prices have risen 20% in Canberra, 16.3% in Adelaide, 15.1% in Brisbane, 11.2% in Sydney, and 5% in Melbourne.

… we have a small favour to ask. Millions are turning to the Guardian for open, independent, quality news every day, and readers in 180 countries around the world now support us financially.

We believe everyone deserves access to information that’s grounded in science and truth, and analysis rooted in authority and integrity. That’s why we made a different choice: to keep our reporting open for all readers, regardless of where they live or what they can afford to pay. This means more people can be better informed, united, and inspired to take meaningful action.

In these perilous times, a truth-seeking global news organisation like the Guardian is essential. We have no shareholders or billionaire owner, meaning our journalism is free from commercial and political influence – this makes us different. When it’s never been more important, our independence allows us to fearlessly investigate, challenge and expose those in power.

 

Article Source: www.theguardian.com

 

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