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API SEPTEMBER 2014
SEPTEMBER 2014 API
Investors who have been featured in API answer questions from readers
Published: June 2014
¿ DEVELOPING WITH SMSF
QAndrew, you indicate that you own
property in a self-managed super fund
(SMSF) that you have developed through
the addition of two townhouses. My
understanding is that you can’t develop
properties held by an SMSF. I’m particularly
interested, as I own a property in Southport
on the Gold Coast that’s zoned RD6,
allowing the construction of a seven-storey
building, with one bedroom per 33 square
metres. Some additional information on this
subject would be greatly appreciated.
AInvesting in property in a SMSF is
hugely rewarding and complex. But it
can be a disaster if not done properly. The
risks could be penalties of up to nearly half
of the value of the assets in the super fund.
My first piece of advice to people wanting
to do this is to get specialist advice,
preferably someone who is a certified
financial planner, and even better if they’re
a certified practicing accountant as well.
A financial considerations strategy,
risk profile and cash flow need to be
considered, as well as the tax implications.
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Property can be developed in a SMSF so
long as you have all the funds you require
already in the super fund. If you wish to
use borrowings in the fund to purchase a
property, it can be done, but the property
must be complete already, i .e. a ‘single
acquire able asset’ . A lso it must be in
accordance with the investment strategy
of the fund. It’s a complex area and a quick
response can’t cover all contingencies.
The SMSF must be set up to fund
retirement and this means there must be
sufficient liquidity – cash – to pay pensions.
If the structure isn’t set up properly or even
if the deposit is paid from the wrong entity
it can cause breaches, which could be very
costly. Pay for good advice, is my advice.
Published: July 2014
¿ HOW CAN I START INVESTING?
QYour story was inspiring, especially for
those with young families. What advice
would you give if you’re in your 30s and
haven’t yet started investing?
AFirstly, it’s never too late – just refer
to the article! Life stages can vary
and change dramatically during your
30s. Because of this, you really do need a
solid plan on how you wish to approach
things. Educating yourself about as many
facets of property investment as possible,
while recognising the benefits of seeking
professional help along the way, will assist
in deriving that plan. No matter what life
stage you’re at, property investment is
possible as long as you know where you’re
heading and how you’re going to get there.
The foundation, in my opinion, is
understanding your finances. An ad hoc
budget or none at all will see valuable
dollars being spent on entertainment,
clothing, cars etc. A detailed budget is a
must, as it will allow you to see what you
can contribute to your property investment.
Once you’ve done this, then you can start
to see what’s possible. This then allows the
investor to feel comfortable with the level
of debt they’ll incur. Knowing you can live
to a strict yet fair budget will only serve
to reinforce that you can actually afford
the level of debt, literally and mentally,
API recommends seeking independent
financial advice from professionals
regarding their individual circumstances.
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