Self Managed Super Funds Case Study
The Issue
Andrew at 61 years of age, was running a successful IGA Supermarket Franchise in a building which was now paid off. Andrew wanted to retire and let his son James take over the business. The problem was that James couldn’t get a loan to buy the property because, like most people his age, he couldn’t afford a deposit for a $1M property.
Andrew, his wife and James had an SMSF with total assets of $500K.
The Solution
Andrew was advised that his super fund could acquire the property using a SMSF loan. The family’s SMSF invested in the property by taking out a $650K loan, and the SMSF used its existing funds for the $350K deposit and other transaction costs. Andrew and his wife received $1M, which they used to top up their super and produce a retirement income stream.
No CGT was payable as the sale was exempt under the small business retirement provisions.
The Services provided:
- Problem solving and an independent sounding board
- Strategic planning
- Tax planning and structuring
- Superannuation and retirement strategies
- Estate and succession planning
- Risk management in the case of death or disability
- Asset protection from creditors
- Investment advice - Direct Shares and Derivative Strategies
- Banking, finance and debt management
- Cashflow management
- Personal budgeting
The Result
Andrew and his wife each received a tax deduction for up to $100K of the super contribution and received their Pension income tax-free as they were both over the age of 60. James’ business paid the same tax deductible rent as previously except now the $75K p.a. went to the Family SMSF. Andrew didn’t have to worry about selling the business or premises to an outsider and James didn’t have to worry about being evicted or suffering ‘unfair’ rent increases.
The SMSF now has a well diversified property with good mix of blue chip Australian shares and the investment property is paying a stable secure income yield.
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