Graeme and Marilyn are a married couple in their forties. Their combined super balance is $261,500 however it is not in a self managed super fund (SMFS). They like property and are wishing to buy an investment property. They both earn good income, $80,000.00 each.
Based on the new borrowing rules within super, Graeme and Marilyn compare the benefits of holding the asset in super v’s out of super.
- By holding the investment in super, the Net Asset Value (NAV) of the property is worth $1,931,561
- By holding the investment outside of super, the Net Asset Value of the property is $1,503,979.
- Net Outcome: holding the asset in super delivers a NAV benefit of $427, 582.
Outcomes
- Graeme and Marilyn decide to set up the SMSF for the purpose of gaining greater control over their superannuation, have invested in an asset class they like, have purchased an investment property without having to use their own money
- Their compulsory superannuation contributions have serviced the debt, which is extinguished early in year 12.
- By using their compulsory super contributions to service the debt there has been no drain on their personal cash flow.
- There is no capitals gains tax on the sale of their premises when they retire. This has been achieved by converting their SMSF to pension phase a age 60.
- The taxation structure within the super environment has provided them with an extra $427,582 when they retire.
- Through gearing they have increased their super assets which are in a tax effective environment.
