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SMSF Limited Recourse Borrowing Arrangments

What is an SMSF limited recourse borrowing arrangement?
An SMSF limited recourse borrowing arrangement typically involves an SMSF taking out a loan from a third party lender or from a related party, such as a member of the fund.  The SMSF then uses the loan, together with its own available funds, to purchase a single asset (normally a residential or commercial property) that is held in a separate trust (the Bare Trust or Property Trust). The SMSF trustee acquires a beneficial interest in the asset with the trustee of the Bare Trust being the legal owner of the asset.  The SMSF trustee has a right to acquire legal ownership of the asset by making one or more payments to repay the loan.  If the SMSF defaults on the loan, the lender's rights are limited to the asset held in the separate trust.  This means there is no recourse to the other assets held in the SMSF.  The lender will normally require a personal guarantee from the SMSF members (who cannot access the other SMSF assets if the guarantee is called upon). Any investment income received from the asset goes to the SMSF, which pays all expenses and enters into all contracts (other than the purchase contract).  The Bare Trust does not receive any income or pay any expenses, does not have a Tax File Number or ABN and does not have a bank account. Read more…

Are You In Control Of Your Super?

For most of us, superannuation can be one of our largest assets.  Yet, despite the value involved, many Australians are not engaged with their super, and just hope there will be enough at the end of the day to help them meet the retirement lifestyle they would like.  Unfortunately, hope is not a good investment strategy.  Read more…

Estate Planning & SMSF's

One of the things I like most about self managed superannuation funds ("SMSFs") is the wide range of tax effective estate planning strategies that can be put in place through these wonderful vehicles. With recent super reforms SMSFs are now true intergenerational wealth transfer vehicles. The beauty of them is that, if things have been set up right, the wealth can be transferred tax free to the spouse, the next generation and even the generation after that provided we can establish dependency including financial dependency. These strategies cannot under any other circumstances be replicated through a will, testamentary trust or family trust. So let's take a quick look at the world of estate planning in a SMSF. Read more…

Super Death Benefits and Taxation

For many people, taxation of super benefits during their lifetime is not something they have to think much about - but what happens after death? There are some complex rules around the payment of super death benefits.  Although the rules apply equally to all super funds, there is more flexibility in super estate planning using a self-managed super fund (SMSF) than there is with any other type of super fund.If you understand the rules around super death benefits, and have a good advisor, you can take action to reduce the amount of tax your beneficiaries have to pay.
The following comments are based on the current super and tax laws, which can be subject to change. Read more…

Issues from the Budget 2013-2014

Issues from the 2013-14 Federal Budget

Over the past 6 months the Government has admitted it will not be able to deliver on its election promise of returning the economy to surplus.  Budget night on 14 May finally put a number on the shortcoming - a staggering $18 billion. 

This issue covers the main issues announced on budget night and in the few weeks leading up delivery of the budget, we think will directly impact on our clients.  Read more…

Changes to Small Business Entity Depreciation

The Small Business Entity Concessions are available to businesses with aggregated group turnover of less than $2,000,000 per year.  One of the concessions is the ability to claim accelerated depreciation deductions. Accelerated depreciation deductions are available from the start of the income year where you acquire an asset and either start to use it for a taxable purpose or have it installed ready for use for a taxable purpose (i.e. there is no pro-rata adjustment to your claim if you acquire the asset part-way through the year).  Read more…

Depreciation and Capital Works Deductions

If you own a property that is used to produce income, or is used in your business, you may be eligible to claim depreciation and capital works deductions. The capital cost of the building structure itself is generally written off over a 40 year period (although for some buildings the write-off period is 25 years), and the cost of whitegoods, floor coverings, blinds and other non-structural items are claimed over a much shorter period.  Read more…

Superannuation Guarantee

Employers are required to pay a minimum of 9% super contributions for eligible employees, based on their 'ordinary time earnings'.   Ordinary time earnings includes various items such as wages, allowances, shift loadings, leave payments and bonuses etc. that are related to the employees normal working hours.  A full checklist of items included in ordinary time earnings is located at http://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/00249857.htm&page=25#P714_43634 Read more…
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