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Offline 360c

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And that's the problem with super. If you've been on a high income, a retirement fund balance of $5mill isn't huge if you want to continue a luxury lifestyle. The contribution limits don't allow real wealth accumulation. The more net worth you have, the less useful super becomes.

Absolutely true; but you are talking about the situation for 0.001% of the population in reality. If your big picture net worth is $50 million ++, then $5million isn't especially relevant as an investment vehicle, low taxed environment or not. Having said that, I make the most of every investment opportunity and I still take the view of it being a protected safety net should your financial world implode...........and history is littered with examples of people who have lost that sort of money.

I am not suggesting for a second that super should be ones ONLY investment vehicle, it's just one of a suite of things for me for example. I have much, much more investment $ outside Super; but it doesn't stop me taking the maximum advantage I can under the Super rules. You know me, I LOVE a deal :p

However if you are one of the bottom 90% of SMSF's, that is highly likely to be their biggest investment and it IS their retirement nest egg. So understanding and maximising the opportunity is very, very important. What the Government has to stop is these folks getting access to the money at retirement age, burning through it on luxuries and then entering the tax payer funded pension scheme when their funds are exhausted. That was never the intent of the compulsory super scheme brought in by Keating and labour. This is one of the reasons why the retirement age is being lifted to 70. The proportion of the population on the pension is barely different today then it was before compulsory super, 25 yrs or so after it's introduction. The reason is  the moment they access it they start blowing it knowing that they can fall back on the pension when it runs out. This hole is rapidly being plugged as it should be IMO.



Offline 360c

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Coupled with regulations that change at the whim of each government. You need to look at super as something that's yours but is being f**ked with by Government as they see fit. Its really not yours until you get the funds personally. My view, do NOT put anything more than statutory requirements into super as its a one way street. Better to use your funds yourself and you be in control.

One flaw in your argument Jon. The regulatory environment OUTSIDE super is also built on foundations of shifting sand as the Government finds new and inventive ways of sticking their hands in your pockets. We are one of the highest taxed of all the developed Nations and our cost of living and house prices are also right on top of the list.
So by NOT maximising the opportunity of investing in a low taxed environment, you are choosing to invest in one of the highest taxed environments on the planet which is also at the whim of the Government.  You still have a lot of control of your funds as a Trustee in your SMSF; but certainly not as much as you do outside of one. Don't lose sight of the fact that it will always be a necessity for the Government to make it attractive for people to save for their own retirement. In my view the Super environment will always be the most tax advantaged environment as a result, it's just a question of the degree of advantage.



Offline 360c

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another curiosity I have regarding this is in relation to occupation of the premises.

I understand that it has to be at arms length, and you are not permitted to occupy/utilise a property in a SMSF (unless its commercial).

but when you reach preservation age and have access to your Superannuation, would you be permitted to move into a property owned by your SMSF?  if so it would be a good retirement strategy for younger people.  find the place you'd like to live when you retire, purchase it with Superannuation now.

Yes their are very strict rules on occupancy of the property. It has to be at arms length to you or any of your relatives, associates etc etc. You can occupy it as business real property; but again at arms length commercial market rates. It is a very common strategy for small business to have the freehold to their business in the SMSF. I have a mate who has over $30 million of commercial property in his family SMSF under those provisions. Rivers of gold untaxed in the retirement phase ATM anyway.

I am not 100% sure on your scenario as I don't do residential property outside my principle residence. I have a feeling that your presumption is correct though; but I have a question mark over stamp duty if the rules make you change the ownership entity and their would probably be tax implications if sold from one entity to another.



Offline amgsl55

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This is one of the reasons why the retirement age is being lifted to 70.

Just to be pedantic, it's the age one can access the pension which is being lifted, not the retirement age.

As much as all our circumstances are different, i believe super is a great vehicle for tax reduction and investment growth, however it needs to be managed smartly and actively to capitalise on it's abilities. Because of the contribution restrictions on super, unless your very astute with you investments one should never look at super as being the vehicle to fully fund your retirement (whatever age that may be) and just as much attention should be paid to investments outside of super.



Offline shack

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One flaw in your argument Jon. The regulatory environment OUTSIDE super is also built on foundations of shifting sand as the Government finds new and inventive ways of sticking their hands in your pockets. We are one of the highest taxed of all the developed Nations and our cost of living and house prices are also right on top of the list.
So by NOT maximising the opportunity of investing in a low taxed environment, you are choosing to invest in one of the highest taxed environments on the planet which is also at the whim of the Government.  You still have a lot of control of your funds as a Trustee in your SMSF; but certainly not as much as you do outside of one. Don't lose sight of the fact that it will always be a necessity for the Government to make it attractive for people to save for their own retirement. In my view the Super environment will always be the most tax advantaged environment as a result, it's just a question of the degree of advantage.

Point taken. However its access to those funds that bothers me the most. Outside of Super I can effectively do what I like. I also have other options such as family trusts, low income beneficiaries, overseas entities, business options etc etc. I guess even though we are as you say "one of the highest taxed and highest cost" countries, I will still have the freedom to do with whats left after tax, what I want.



Offline 360c

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Thanks again Scott, your balanced approach is always appreciated.

In fact my exposure to property is significantly lower these days, I only own a small unit complex in addition to my home and thats it.  the rest is in managed funds/shares which are balanced but not property based.

there is actually an ulterior motive for doing this in addition to growing the Superannuation.  on the Opposite side of the river to my home is a unit complex (12 waterfront townhouses).  It is old but tidy, and the precinct is approved for 10 story development.  Part of my thinking is if I can buy a unit in there (preferably through a SMSF) then for at least the next 25 years I will have little/no motivation to sell that property, in turn maintaining my view for at least the next 25 years.

That said I do think they would be a good investment owed to their location and rental return. but rather than purchasing as an individual, If purchasing through a SMSF, I'd have greater motivation to simply hold and leave in this case.

because all of the discussions had above regarding preservation ages and tax implications do concern me, especially given how many years away my preservation age is, there's nothing to stop the government from bending people in my age group even more than they already have. so I might as well make it work for me now as well as the future.

Hmmmm, interesting one with a bit more detail :)

First thing that strikes me is your proposed townhouse is part of a block of 12 townhouses, seemingly all strata titled. The area might be approved for 10 story development; but one townhouse alone isn't going to attract a developer who would have to buy the majority if not the lot. Easier said than done, so the upside potential may be very limited from that point of view.

You could do it based purely on the rental return and maintaining the view from your current house; but my earlier point of having all your SMSF eggs in one tiny basket still holds true.

Coming at it from a different angle, you say you have a "small unit complex" now. If you own it outright or could pay it out with equity from other sources, you could transfer that into your superfund under the $180k per year or $540k over any 3 year period. Downside is it is treated as a sale so you pay stamp duty again; but taking the long term view it's a much smaller consideration. Then all the income from it is taxed at superannuation rates rather than marginal or company tax rates. You could then use that income to invest in blue chip companies paying strong fully franked dividends. You could build up your SMSF balance very substantially over 25 years ++.

I wouldn't worry too much about what may or may not happen with Government changes into the future.



Offline mondi

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So you guys are not really keen on residential property?????


It's bloody hard getting anything industrial or commercial in a town outside the big smoke. It's the same guys all the time buying and building and 99% of the time the land/properties are not advertised. The only time stuff is advertised is when the price is way over the top....



Offline mhh

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So you guys are not really keen on residential property?????


It's bloody hard getting anything industrial or commercial in a town outside the big smoke. It's the same guys all the time buying and building and 99% of the time the land/properties are not advertised. The only time stuff is advertised is when the price is way over the top....

I'm keen on it. All my IP's are residential.



Offline alvchua


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So you guys are not really keen on residential property?????


It's bloody hard getting anything industrial or commercial in a town outside the big smoke. It's the same guys all the time buying and building and 99% of the time the land/properties are not advertised. The only time stuff is advertised is when the price is way over the top....

Years ago, with my first IP, I had to evict a family with 2 young children - father was growing cannabis in the house, not paying rent etc and it really was difficult being the person that had to toss 2 young kids out to sleep in their car! I vowed then not to touch residential IP hence concentrated 100% on commercial properties - I've been very lucky that they've served me well thus far though in the last 3 years, have started investing in residential properties again but run them very much at arms length and not get involved with rental management etc.

Commercial IP is hard work at the moment unless you have a long term secure national tenant with a long lease. Land tax and grouping laws have and continue to cost me hundreds of thousand every year! At least with a national tenant, you can pass land tax onto them!

Forgiveness is easier to achieve than permission!



Offline mondi

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Years ago, with my first IP, I had to evict a family with 2 young children - father was growing cannabis in the house, not paying rent etc and it really was difficult being the person that had to toss 2 young kids out to sleep in their car! I vowed then not to touch residential IP hence concentrated 100% on commercial properties - I've been very lucky that they've served me well thus far though in the last 3 years, have started investing in residential properties again but run them very much at arms length and not get involved with rental management etc.

Commercial IP is hard work at the moment unless you have a long term secure national tenant with a long lease. Land tax and grouping laws have and continue to cost me hundreds of thousand every year! At least with a national tenant, you can pass land tax onto them!


Yes, I was in a similar situation a few years ago when one of the Rentals was used as a Drug factory. Caused no end of pain, then the little family dispute happens and put me back to square one. Need to start building up again.......



That was the other thing, have it managed or self manage.......



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