I am 66. My husband is 63 and we want to buy a commercial property. What is the best way to set it up so that we pay minimal tax, as this will be our retirement income. We will be borrowing a certain amount to finance the purchase.
My husband is currently employed full time.
Speak with your accountant about buying it within a SMSF, provided you are still working enough to pass the employment testn (so your super is still in the accumulation phase there may be some benefits for you both).
You will need to consider how you will fund the property, why without knowing your previous track record you would want exposure to a higher risk property asset (so close to retirement) – higher risk meaning greater likelihood of long-term vacancies which is not good for repayment of interest etc.
Thanks, Scott no Mates,
The question is put there to collect opinions…..thanks!
This particular commercial property has three bedroom living accommodation attached to it. If we buy in a super fund we would not be able to live there would we, or can you later transfer it out of the fund if need be? We don't need it ourselves now.
SMSF would be well worth looking at. Other than that a discretionary trust.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terryw,
How does the discretionary trust work…….that is,if the topic is not too lengthy a one, and you have time and inclination!!!
with a dt the trustee holds property for a wide class of beneficiaries. The trustee then distributes any profit of the trust to one or more beneficiaries at their discretion. This flexibility can result in tax savings. And because a beneficiary has no entitlement to funds of the trust (until a distribution is declared) it offers great asset protection.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Many thanks for the info, it gives us a good starting point of inquiry.
Hi Pesa,
You are correct that you could not live in the property if it was owned by the super fund. However the income would be tax free if you were drawing a pension. The property could be later transferred out of the fund if you wanted to live in it, but you have to consider the stamp duty on this transfer.
In making the decision you need to consider your other income and assets. If this property will be your only asset, and you will be relying on the income, you may be best just to buy it in your own names.
You should also look at land tax depending which state you are in.
Hope this helps, let me know if i can help further.
David
Thanks Wilmacacc,
Do you know if one can use the super fund equity to finance another property outside of the fund….for example if one wanted to buy land to build a house to live in, or is the fund too controlled ? [you're not allowed to "jeopardize" it?]
Sorry. Questions, questions!!!
Pesa
Hi Pesa,
You cant really access the equity in a property the fund already owns without taking the propert out of the superannuation environment. Super funds can borrow in limited circumstances, however it has to be to acquire an asset, it cant borrow against an asset already owned by the fund.
If that is your intention, there are some strategies you could put in place depending on your situation.
If you want to give me some more details about your situation Id be happy to help.
You can send me a private message if you dont want all your details on the forum.
ps. Don't appologise for questions, thats what the forum is here for.
David
Thanks again Wilmacacc,
We are currently negotiating for this property, so if we are successful would appreciate further help and suggestions on strategies ….how can we send you a private message??
Pesa
Pesa,
Click on my name and view public profile.
You can send an email from there.
David
Pesa,
Send me a private msg (click on my name, then private msg) – I will forward you an option that I am considering, it already has the backing of a bank and most legals taken care of.
It may suit, and you may be able to discuss with the people involved.
Olli
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