1. SMSF Instalment Warrants Aaron Dunn, SMSF Specialist Adviser Shift your super into a higher gear

2. Disclaimer

This presentation provides general advice only. No direct or implicit recommendations are given in this document. This means that the general advice provided has not been prepared taking into account your individual financial circumstances (i.e. your investment objectives, financial situation and particular investment needs). You should assess whether the advice is appropriate to your individual financial circumstances before making an investment decision. You can either assess the advice yourself or seek the help of an authorised representative through an Australian Financial Services License (AFSL) holder.

SMSF Funding Pty Ltd believe that the information in this presentation is correct at the time of compilation but do not warrant the accuracy of that information. Save for statutory liability which cannot be excluded, SMSF Funding Pty Ltd disclaims all responsibility for any loss or damage which any person may suffer from reliance on this information or any opinion, conclusion or recommendation in this presentation whether the loss or damage is caused by any fault or negligence on the part of SMSF Funding Pty Ltd or otherwise.

3. Gearing in Super

S.67(4A) requirements

• Borrow funds to acquire an asset held on trust so that the trustee has beneficial interest in the asset and a right to acquire legal ownership (or replacement) through payment of instalments

• In the event of default or exercise of rights by the trustee, lenders recourse is limited to rights relating to the asset

• The asset (or its replacement) is one which the fund would be permitted to acquire and hold directly

4.

How it works

Bank Fund members Instalment Warrant Trust(Custodian) Secured Asset 5. The parties involved Client Finds property, seeks finance(agent, buyers advocate) Lender Structures and provides finance Lawyer Create Custodian Trust, documentation for IW, conveyancing (property) Financial Planner Financial Product considerations, Investment Strategy, Insurance Accountant / Administrator Fund Admin, Annual Return & Reporting Auditor Financial and Compliance Audit 6. Targeting your clients

Four target areas to discuss with clients in using an SMSF Instalment Warrant:

• Business owners renting or wanting to upgrade

• Business premises held outside of super

• Residential and Commercial Property Investors

• Pre-retirees who are planning a sea-change

7. Gearing options

Borrowings from the bank

• Personal guarantees?

BYO Banker

• refinance against existing equity

SMSF JV

• Special purpose funds for business partners / joint investors

8. Targeting Clients - #1 + #2

Business Owner/Operator

• Now able to gear to acquire or transfer commercial premises within an SMSF

• • Regardless of existing borrowings outside of super for existing premises

• Ability to utilise various super and tax strategies to reduce or eliminate any CGT.

• R estructuring of arrangements can eliminate existing non-deductible debt

• Strategy target age 35+

9.

The Family Home

Family home = $700,000

Debt = $300,000(not deductible)

potentially used as business security

The Family business

Run a successful widget business.

Business premises held in family trust

• asset protection

Factory Valued at $600,000

Debt of $200,000(deductible)

Rental agreement (business & trust)

John & Jane Existing Superannuation John = $150,000 Jane = $100,000 Case Study The power of the SMSF & Borrowing Rules Widget Co. Pty Ltd (business) Family Trust Rent Security Security 10. John & Jane John & Jane SMSF John = $150,000 Jane = $100,000 Borrow = $350,000 (LVR 70%) Case Study The power of the SMSF & Borrowing Rules Widget Co. Pty Ltd (business) Family Trust Rent Security Instalment Warrant Trust Limited Recourse Loan Asset held on trust via Custodian Arrangement

Outcomes for John & Jane

Creation of SMSF & Instalment Warrant

Transfer of property

• No CGT

Family Trust receives $600k

• payout FT debt ($200k)

John & Jane payout $300k home loan

Further $100k to invest(can contribute back into super)

100%deductibledebt for SMSF, being made fromdeductiblesuper and rental payments in business

Future growth of property no CGT(if sold post retirement)

Paid off home loan 11. Targeting Clients - #3

Property Investors (residential or commercial)

• Need to consider

• • Yield

• • Capital growth

• • LVR

• • Bank or BYO banker

• • Ability to contribute to super / servicing

Strategy target age 35+ 12. Targeting clients - #4 Find the perfect house for when you retire? 13. Finding your dream home to retire

SMSF canacquire nowusing SMSF instalment warrant

Available to rent until retired

• You/client cant use (sole purpose test)

Sell own home and move into dream home

• No CGT on transfer when in pension phase

• Tax-free in-specie lump sum (>60 tax free);

• Contribute proceeds of principal residence to replace asset value (subject to age and caps)

No stamp duty*

• Need to consider relevant state stamp duty requirements

Strategy target age 45 to 50+

14. Where are we at?

Increasing enquiry for property investment

• Lower interest rates have created interest in direct residential and commercial property investment

• Bricks and mortar as part of their retirement plans

Gearing in super solution becoming mainstream

• Establishment costs may be a deterrent

Property will capture higher level of asset allocation in SMSFs moving forward

15. 16. Self Managed Super Funding Pty Ltd

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http://www.smsfunding.com