Buying other assets in SMSF:

SMSFs have unique advantages in terms of flexibility and access to a broad range of assets that can be selected to suit your risk profile, tax requirements and investment return objectives.  The assets available to SMSFs may not be available to larger retail or industry funds with five or more members. For example, a superannuation fund with less than five members can acquire business real (commercial) property from members and other related parties. In addition to the SMSF investing directly, it is possible for the fund to purchase an asset via a limited recourse borrowing arrangement. This permits the fund to borrow for the purposes of the arrangement, providing the asset is one that the fund could acquire and it is held on trust until the loan has been extinguished. A consultation with an experienced Superannuation and Taxation Lawyer may be able to tailor a SMSF investment strategy that is compatible with your risk-return profile whilst complying with all relevant superannuation and tax laws.

There are four main advantages to using a SMSF: investment choice and control, flexibility, taxation benefits and costs. A client may forgo the advantage of one of these elements to gain an advantage to one or more of the others. As a rule of thumb, it is considered that an SMSF with investments of less than about $200,000 may not be cost-effective. The reason is that at less than that amount, the costs of operating a SMSF are greater than the cost of investing through other superannuation arrangements. In some cases there may be reasons for having an SMSF where assets are less than $200,000. These could include that the fund will build to $200,000 or more within a short time, or because specialised investments or the value of assets of the fund has decreased because of benefit payments.  Advice from a Superannuation and Taxation Lawyer can ensure that your SMSF structure and investment mix maximises your utility.

The major reason for establishing a SMSF is the control the trustees and members have over investment decisions. Many trustees of SMSFs prefer to invest directly by purchasing shares, interest bearing securities and real estate, as they consider their decisions can produce better returns than professional superannuation fund managers. A SMSF has the flexibility to buy and sell investments to take advantage of market timing based on the trustee’s judgment. This may permit the trustees to obtain greater returns for the fund based on different investment time horizons used by the larger funds. Professional and holistic legal advice from a Superannuation and Taxation Lawyer coupled with sound financial advice may be hugely beneficial to ensure your SMSF property acquisition optimizes your tax profile and investment return.

SMSFs are treated for tax purposes under the income tax law exactly in the same way as all other superannuation funds. However, it is the way the tax rules are used that provides efficiencies for the fund. Tax efficiencies are able to be obtained from the control and flexibility over investments so that buying and selling can be timed to ensure the greatest tax benefit to the fund. Comprehensive legal and financial advice form a Superannuation and Taxation Lawyer can help ensure that you minimise your taxation obligations whilst attaining an investment return that satisfies your needs.

If you would like further information or wish to discuss your SMSF matter with us please do not hesitate to contact us by telephone on (02) 9233 4048 or by email to info@navado.com.au.

This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.