Following on from the last 2 years of disastrous results for the majority of superfunds, many mum & dad investors are now seeking alternative returns from their superfunds. Having witnessed up to 40% capital losses in one year and then to add further insult the superfund was charged “financial advisor fees” to lose money, has left most investors bewildered and disappointed.
With a vast numbers of Baby Boomers now speeding towards retirement many are taking a much closer interest in the health and wealth of their superfund’s and are seeking alternative ways to consolidate their nest egg.
The new opportunity for superfund’s now comes in the form of DIY (do it yourself superfund’s) who have the ability to not only invest directly into Real Estate but also to now borrow. One of Perth’s leading investment property specialists, with a 25 year career specialising in residential and commercial property investment, Mark Hay is at the forefront of assisting, advising and teaching investors how to best apply their superannuation funds to property investment.
Mark Hay highlights that one of the legacies left by the Howard government in 2007 was the changed laws surrounding the ability for enabling DIY super funds to borrow to purchase both commercial and residential investment property plus have the ability upon retirement or pension phase to pay zero tax. Mark stated that these 2 major fundamentals have been the biggest moves within the property investment era since the Keating/Hawke era re-introduced negative gearing.
Mark Hay Realty Group conducts seminar workshops that demonstrate to typical investors how to go about this, and states that some of the major points of this seldom known form of investment tool are as follows;
1. Ability to borrow and gear your superfund via an instrument called “warrant”.
2. LVR (loan to value ratios) can borrow fundamentally 65 to 70% for residential and 55 to 60% for commercial property.
3. Superfund income is taxed only at 15% and capital gains tax at only 10%.
4. Once converted to pension phase upon retirement, zero tax applies no matter if you have $100,000 or $10,000,000 in your superfund.
5. The loan structures are set up as non recourse i.e. if something went wrong the banks wouldn’t be able to claim anything further from you other than that one particular property.
Mark Hay indicated that with over $1.2 trillion held in superfund assets with the majority held directly or indirectly in the share market, he believes this new ruling on superfund investment has been deliberately kept quiet to ensure the big fund managers don’t see a major exodus from the “Superfund Management” sector, which would gravely erode the current high fees everyone pays to have their superfund managed, regardless whether the fund makes or loses money for you.
Over the last 6 months Mark Hay Realty Group has noted nearly 50% of their commercial sales and 30% of their residential sales have been transacted by mum and dad superfund’s with a ever increasing trend.
Mark noted some basic fundamental points surrounding this type of investment;
1. Approximately $70,000 plus would be a minimum amount to start. This could be made up by calling in various amounts of superfund contributions that may have been paid into various superfund’s in previous jobs.
2. Monies would need to be placed into a DIY superfund structure which needs to be set up with a suitably qualified accountant.
3. Such DIY needs to be audited and a tax return filed each year.
4. When purchasing the property it is essential that correct wording is placed upon the contract to represent the warrant, it is too late to change once an offer is made.
5. Such property (either commercial or residential) needs to fit certain criteria specific to the superfund i.e. location, type, tenancy/lease, professional management etc.
6. The trustee for the warrant needs to satisfy themselves of the property, the lease and ongoing contributions to the superfund.
7. Not all your superfund money need to be DIY and you could choose to have a balance or split.
Whilst this may all sound a little complex, Mark Hay Realty Group can point you in the right direction to engage the necessary professionals to assist and guide you.
I have recently completed sales within the range of as little as $125,000 to $1,800,000 and everything in between, in the entity of the superfunds. As the general public becomes more aware of this outstanding opportunity, a little like a cross between the benefit of negative gearing and the tax free status of your own principle place of residence. We will find a continuing trend for people to take control of their superfund’s, cease paying excessive fees and be responsible solely for their investment decision via the rock solid security of bricks and mortar. Correctly used, this vehicle for investment can be worth $10,000 to $100,000 of dollars to benefit the average mum and dad by the time they reach retirement age.
Mark Hay is the Principal of Mark Hay Realty Group, a holder of a Diploma in Business Management and qualified Financial Planner, specialising in Property Investment for over 25 years.