The SMSF Masterclass - The Super Powers of Super - Jeremy Iannuzzelli - 28/06/2023 - AUS Prop

Name: The SMSF Masterclass - The Super Powers of Super - Jeremy Iannuzzelli - 28/06/2023 - AUS Prop
Uploaded: 2023-06-30T02:08:37.000Z
Duration: 3 h 18 min 14 s

New Section

The hosts discuss various topics including self-managed super funds, accounting, consumer confidence, inflation, and savings.

Learning Something New Every Day

Jeremy has learned how to take the mirror off the stream yard so his hair goes in the right direction. Link to Timestamp

Consumer Confidence and Business Performance

Some businesses are doing exceptionally well while others are feeling the pinch of reduced consumer spending. This is typical during inflationary environments. Link to Timestamp

Savings accumulated during the COVID lockdown period are starting to dwindle, with a significant decrease compared to 12-16 months ago. Link to Timestamp

Impact on Construction Industry and Travel

The construction industry is pulling back in recent weeks.

There is a noticeable decrease in people spending money on holidays or traveling, as observed through reduced flight occupancy. Link to Timestamp

Headline inflation was down due to decreased spending on travel and fuel. Core inflation, which includes wages, determines interest rates. Link to Timestamp

Understanding Interest Rate Rises

In this section, the speakers discuss the impact of interest rate rises on wages and how it is affecting people. They also compare the current situation to previous periods of high interest rates.

Impact of Interest Rate Rises

People are experiencing interest rate rises as adults for the first time, which is reminiscent of the 80s.

The average purchase price of homes has increased significantly compared to wages, making it more challenging for people to afford housing.

Despite relative differences, many individuals are feeling the financial pinch caused by rising interest rates.

Potential Extremes in Interest Rates

The speakers do not believe that interest rates will reach extremely high levels like in the past.

The Reserve Bank of Australia (RBA) aims to bring down inflation by gradually increasing interest rates.

Setting interest rates too high can lead to collateral damage and negatively impact the economy.

Historical Examples

In the past, when inflation was high, central banks raised interest rates significantly to combat it.

This approach led to a recession that lasted a decade in the 90s due to the significant financial strain on individuals with housing loans or debt.

Quotes of the Week

In this section, each speaker shares their quote of the week and briefly discusses its significance.

Dalai Lama's Quote

"Just one small positive thought in the morning can change your whole day."

This quote resonates with one speaker as they believe in starting each day with a positive mindset.

Henry Ford's Quote

"If you always do what you've always done, you'll always get what you've always got."

This quote emphasizes breaking out of repetitive cycles and seeking new approaches for overcoming challenges.

Sitting in Shade Quote

"Someone is sitting in shade today because someone planted a tree a long time ago."

This quote relates to the conversation about self-managed super funds (SMSFs) and the importance of making wise financial decisions for future benefits.

Importance of Self-Managed Super Funds

In this section, the speakers discuss the value and confusion surrounding self-managed super funds (SMSFs).

Value of SMSFs

The speakers believe there is significant value in SMSFs but acknowledge that there is also confusion surrounding them.

They express frustration with limited access to information and resources without paywalls.

Disclaimer and Financial Advice

The speakers emphasize that none of the information provided should be considered financial advice.

They encourage individuals to seek independent legal, financial, and taxation advice based on their specific circumstances.

Conclusion

In this final section, the speakers wrap up their discussion on self-managed super funds and reiterate their goal to provide comprehensive information on this topic.

One-Stop SMSF Shop

The ultimate goal is for this conversation to serve as a one-stop shop for all things related to self-managed super funds in the property space.

The speakers aim to educate and provide accurate information while dispelling confusion surrounding SMSFs.

Please note that these notes are based solely on the provided transcript.

Self-Managed Super Fund and Tax Structuring

The speaker discusses the importance of correct tax structuring for self-managed super funds (SMSFs). They mention that they can provide guidance on tax structuring but cannot advise on specific investment opportunities.

Tax Structuring for SMSFs

Proper tax structuring is crucial for self-managed super funds.

The speaker can offer advice on tax structuring but not specific investment recommendations.

Stories of successful and unsuccessful investments will be shared to provide insights.

Topics Covered in the Session

The speaker outlines the topics that will be covered in the session, including ATO audits, CGT reduction, cash flow variations, and treating properties as a business.

Topics Covered

The session will cover ATO audits, CGT reduction, cash flow variations, and property management strategies.

Treating properties as a business will also be discussed.

The speaker expresses excitement about the upcoming session.

Advertisement and Introduction to Jeremy

The speaker introduces an advertisement before introducing Jeremy. They emphasize the importance of being prepared when purchasing property.

Advertisement and Introduction

Being unprepared when buying property is risky.

An advertisement is presented regarding a course on becoming fully prepared when buying property.

Jeremy is introduced as the "person of the hour."

Scott Agate's Property Negotiation Expertise

Scott Agate's expertise in negotiating with real estate agents is highlighted. His course on property negotiation is mentioned.

Scott Agate's Expertise

Scott Agate has helped people save tens or hundreds of thousands of dollars through his property negotiation skills.

He has created a course called "Get Buyer Ready" to teach others how to negotiate and transact on properties effectively.

The course aims to help buyers avoid common pitfalls and secure properties at the best prices.

Introduction to Jeremy and His Experience

Jeremy's background and experience in property investment are discussed. His focus on SMEs and passion for helping people achieve financial freedom is mentioned.

Introduction to Jeremy

Jeremy has over 12 years of experience in property investment, particularly focusing on SMEs.

He has helped over a thousand clients and is passionate about assisting people in gaining financial freedom through proper tax structures.

It is mentioned that Jeremy has also opened his own sports store.

Crown King Sports Store

The speaker discusses Jeremy's previous venture, Crown King Sports Store, which sells sporting equipment to local clubs.

Crown King Sports Store

Jeremy previously owned Crown King Sports Store, selling sporting equipment to local clubs.

The store started with cricket equipment but expanded into soccer as well.

Although Jeremy no longer runs the store, it continues to thrive under new management.

Jeremy's Property Investment Journey

Jeremy shares his journey in property investment, including the number of properties he currently holds and his involvement with KHI Partners.

Property Investment Journey

Jeremy bought his first investment property around 2007 or 2008 and now holds 23 properties.

He finds property investment to be a passion and enjoys working with KHI Partners, where they reconcile thousands of properties annually.

Being able to witness clients executing their plans towards financial success is a privilege for him.

Casual Conversation and Conclusion

The conversation takes a casual turn, discussing movies and Jeremy's exhaustion from a busy day.

Casual Conversation and Conclusion

The conversation briefly touches on the movie "The Accountant" and Jeremy's exhaustion from a busy day.

The section concludes with light-hearted banter about shooting things in video games.

Timestamps are approximate and may vary slightly.

ATO Audit Focus in 2023

The ATO (Australian Taxation Office) is focusing on auditing investment loans and collecting data to verify the accuracy of tax returns with investment properties.

ATO Data Collection

The ATO is receiving information directly from banks regarding investment loans.

They have been collecting data from property management software and rental property information.

Approximately 90% of all tax returns with investment properties have incorrect deductions.

Interest Claims and Equity Extraction

The ATO will focus on how people claim interest for their investment properties.

They will ensure that equity extracted from properties was used for investment purposes.

Specifically, they will investigate cases where equity from one property is used to purchase another but interest is still claimed on the original property.

Common Mistakes for Property Investors

Some accountants incorrectly claim stamp duty as a cost, which is not allowed for residential property investments.

Lenders mortgage insurance cannot be claimed upfront; it is amortized over five years.

Travel costs related to residential properties are no longer deductible unless the property is treated as a business.

Interest claims and ad backs are often done incorrectly.

Insurance payouts received for property damage should be shown as income.

Water usage reimbursements by tenants should also be included as income.

Buyer's Agent Fees

Buyer's agent fees related to the purchase of a property are treated as capital expenses.

However, if a buyer's agent provides advisory services or helps maintain a portfolio, some portion may be deductible based on commercial basis.

Common Pitfalls for Property Investors

This section highlights common mistakes made by property investors that can lead to audit issues or missed deductions.

Incorrect Claiming of Stamp Duty

Stamp duty cannot be claimed as an upfront deduction for residential property investments, except in rare circumstances in the ACT.

Lenders Mortgage Insurance and Borrowing Costs

Lenders mortgage insurance is not claimed upfront; it is amortized over five years.

Some borrowing costs may be incorrectly claimed, such as travel costs for residential properties (no longer deductible).

Interest Claims and Ad Backs

Many people make mistakes when claiming interest on their investment properties.

It is important to show ad backs, such as insurance payouts received for property damage.

Water Usage Reimbursements and Other Income

Water usage reimbursements by tenants should be included as income.

Buyer's agent fees related to property purchase are generally treated as capital expenses, but if they provide advisory services or help maintain a portfolio, some portion may be deductible based on commercial basis.

New Section

In this section, the speaker discusses self-managed super funds (SMSFs) and their relevance to cryptocurrency investments.

SMSFs and Crypto Investments

The speaker mentions that targeting crypto investments in SMSFs is not as hot of a topic as before due to many people experiencing losses or minimal profits.

Data from currency exchange platforms is being used to catch individuals making transfers between cryptocurrencies and fiat currencies, leading to potential tax implications.

The speaker acknowledges that discussing SMSFs may upset some people during tax time.

New Section

In this section, the speaker addresses ways to minimize capital gains tax (CGT) related to property sales.

Minimizing CGT on Property Sales

Capital gains tax (CGT) applies to the profit made from selling assets like properties, shares, or bullion.

Holding an asset for over 12 months qualifies for a 50% discount on CGT. Assets held for less than 12 months are subject to full CGT.

It's important to note that the date of contract matters when reporting a property sale for tax purposes, even if settlement occurs later.

Timing the contract signing close to the end of a financial year can push the capital gain into the next financial year, potentially offsetting interest costs.

The speaker mentions an example where someone wanted a vendor to sign a contract after July 1st but couldn't enforce it if they refused.

New Section

In this section, the speaker discusses additional strategies for minimizing taxes related to capital gains and superannuation contributions.

Additional Strategies for Tax Minimization

Utilizing the five-year carried forward superannuation rule allows individuals to top up their superannuation balances from previous years, providing a significant tax deduction on capital gains.

The speaker mentions the importance of considering all CGT requirements and minimization codes to further reduce taxes.

The six-year rule exempts capital gains tax on a property if it is not nominated as the principal place of residence (PPOR) within six years of moving out and selling it.

Moving back into the property within the six-year period resets the PPOR status for tax purposes.

The speaker clarifies that if someone moves from Property A to Property B, they can still claim Property A as their PPOR for up to four years out of the six-year period, resulting in no tax liability.

Timestamps are provided in seconds (s) format.

Understanding the Six-Year Rule for Principal Place of Residence

This section discusses the six-year rule for principal place of residence and how it can be used to minimize capital gains tax (CGT) when renting out a property.

The Six-Year Rule and Renting Out Property

The six-year rule allows individuals to treat a property as their principal place of residence (PPOR) for up to six years, even if they are not living in it.

Many people use this rule when they move back in with family, go overseas, or rent another property that they own.

Renting out a property while still considering it as a PPOR can be beneficial because it allows for potential growth in value and future upgrades.

If someone rents out their home for five years and then decides to sell it, the sale would be CGT-free under the six-year rule.

Introduction to Self-Managed Super Funds (SMSFs)

This section provides an introduction to self-managed super funds (SMSFs), including what they are, why they exist, and how they relate to property investment.

What is an SMSF?

An SMSF is an entity that individuals establish to manage their own money for retirement purposes.

It gives individuals control over where their money is invested and aims to maximize returns for retirement or pension phase.

SMSFs became popular in the mid-2000s after many people experienced significant losses in their superannuation balances during the Global Financial Crisis (GFC).

Setting Up an SMSF

Prior to 2008, there were around 150 thousand SMSFs in Australia. Since then, the number has multiplied tenfold to approximately one and a half million.

There are different structures involved in setting up an SMSF, including using personal cash for investments without leverage or utilizing limited recourse borrowing arrangements.

Limited recourse borrowing structures allow for the purchase of property through custodian entities and bare trusts.

Understanding Limited Recourse Borrowing Structures

This section focuses on limited recourse borrowing structures within SMSFs and their role in purchasing property.

Limited Recourse Borrowing Structures

Limited recourse borrowing structures are the only entities that can be established within an SMSF to buy property.

These structures involve establishing custodian entities and bare trusts.

They provide opportunities for individuals to invest in property through their SMSFs while managing risk and complying with regulations.

Visual Explanation of a Limited Recourse Borrowing Structure

This section provides a visual explanation of a limited recourse borrowing structure within an SMSF.

Visual Representation of a Limited Recourse Borrowing Structure

A diagram is shown to illustrate how a limited recourse borrowing structure works within an SMSF.

The diagram helps understand the different components involved in purchasing property through this structure.

Timestamps have been associated with relevant bullet points.

Understanding the Structure of an SMSF

This section explains the structure of a self-managed super fund (SMSF) and how it works for property investment.

SMSF Structure

An SMSF consists of two entities: a non-trading corporate trustee and a non-trading custodian entity.

The corporate trustee obtains funding for the SMSF, while the custodian entity holds the property on behalf of the trustee.

Once the loan is paid off, the property can be transferred back to the SMSF without incurring capital gains tax.

There may be some minor stamp duty costs involved in this transfer process.

Establishing an SMSF

Establishing an SMSF is not complex for those experienced in doing so.

It is recommended to seek assistance from professionals such as brokers, financial planners, accountants, and solicitors to ensure a seamless process.

However, attempting to establish an SMSF without professional help can lead to mistakes and additional expenses.

Pros and Cons

Pros

With the right professionals guiding you, setting up an SMSF can be a smooth process.

It allows greater control over investments within your superannuation fund.

Cons

Establishing an SMSF can be costly, ranging from three thousand dollars or more.

Finding professionals with expertise in setting up an SMSF may be challenging.

A statement of advice from a financial planner is required by banks that allow borrowing for SMSFs.

Safeguards and Considerations

Banks now require a statement of advice to prevent unscrupulous practices by property spruikers who misled clients into inappropriate investments.

Clients should thoroughly understand what they are doing and consider if it is suitable for their situation before proceeding with an SMSF.

Financial planners and accountants spend time questioning clients about their superannuation, investment history, contributions, and ability to manage the SMSF effectively.

It is important for clients to have a clear understanding of the pros and cons and be able to execute their plans successfully.

Key Considerations for Establishing an SMSF

This section highlights key considerations when establishing an SMSF, including client vetting and experience in property purchasing.

Vetting Clients

Accountants and financial planners spend time questioning clients about their financial situation, investment history, contributions, and current fund performance.

The goal is to ensure that clients understand the pros and cons of setting up an SMSF and can make informed decisions.

Clients should have a track record of successful investments before venturing into more complex entities like an SMSF.

Property Purchasing Experience

It is advisable for clients to gain experience in property purchasing before considering an SMSF.

Going through the property purchasing journey with a few properties first allows clients to understand the process better.

This experience helps them make more informed decisions when managing an SMSF.

The transcript does not provide further content beyond this point.

New Section

This section discusses the pros and cons of self-managed super funds for property investment.

Pros of Self-Managed Super Funds

Self-managed super funds allow individuals to use their accumulated superannuation savings as a large deposit for property investment.

It opens doors for many people to continue buying properties by combining their superannuation savings.

The servicing of the loan is not related to any debts outside of the super fund or personal income, but rather based on regular contributions and rental income from the property.

Cons of Self-Managed Super Funds

Managing a self-managed super fund requires time and responsibility, including making investment decisions, complying with regulations, and ensuring a healthy balance for retirement.

Money in a self-managed super fund cannot be accessed prior to retirement, and early withdrawals can result in penalties.

Some industry funds may have lower fees compared to self-managed super funds, especially for smaller balances.

There are fewer lenders available for self-managed super fund loans, making it more challenging and costly for banks to provide these loans.

Timestamps are associated with bullet points that start with "-".

Pros and Cons of Super Funds

This section discusses the pros and cons of super funds.

Pros of Super Funds

Super funds, such as Super, offer a 15% tax rate on earnings from concessional contributions, which is comparable to tax haven countries.

Capital gains on assets held by super funds for longer than 12 months are taxed at a discounted rate of 10% on the gross gain.

The overall tax rate on capital gains in super funds is lower compared to individual tax rates.

When converted to pension phase, super funds offer tax-free earnings.

Cons of Super Funds

Third-tier lenders have taken advantage of the profitability of super funds, leading to increased competition.

There is a cap on the amount that can be held in a super fund (currently around $1.6 million), limiting potential tax benefits for higher balances.

Proposed changes in government legislation may impact the taxation of unrealized gains in super funds.

Timing and Considerations for SMSFs

This section discusses the timing and considerations for setting up self-managed superannuation funds (SMSFs).

Age and Value Considerations

Age and value are important factors when considering an SMSF. Late 50s or early 60s is generally a suitable age range to start discussing SMSFs.

Setting up an SMSF solely to catch up on lost years may be risky and not recommended.

Rare circumstances may allow for earlier establishment if there are genuine reasons and a solid understanding of how SMSFs work.

The transcript provided does not include additional sections or timestamps beyond this point.

Balancing Costs and Investments in Self-Managed Super Funds

The speaker discusses the importance of finding a balance between the costs associated with running a self-managed super fund (SMSF) and making investments. They mention that maintaining a minimum balance of $250,000 is a good threshold for having conversations with clients or considering investment opportunities.

Finding the Right Balance

It is important to strike a balance between the costs of running an SMSF and making investments.

Having conversations with clients or considering investments when the SMSF balance reaches around $250,000 is seen as a good balance.

This ensures that there are enough funds to cover the costs associated with running the fund while also allowing for healthy investment opportunities.

Leveraging Property Investments in SMSFs

The speaker explains that property can be purchased using cash in an SMSF, but leveraging through loans is often more beneficial. They highlight that extracting equity from one property to purchase another is not possible within an SMSF, requiring liquidation of the first property before buying another.

Leveraging Property Investments

While it is possible to buy property using cash in an SMSF, leveraging through loans can be more advantageous.

Loans allow for greater potential returns on investment and help elevate growth.

It's important to note that extracting equity from one property to purchase another is not possible within an SMSF.

To acquire additional properties, it may be necessary to liquidate existing properties and use the profits along with the original capital.

Personal Success Story with Property Investment in Superannuation

The speaker shares their personal success story of turning a $70,000 superannuation fund into over $400,000 in five years through property investment within an SMSF. They emphasize the significant growth achieved and highlight that this level of success would have been difficult to attain through traditional contributions alone.

Personal Success Story

The speaker turned a $70,000 superannuation fund into over $400,000 within five years through property investment in an SMSF.

This level of growth would have been challenging to achieve solely through concessional contributions or relying on average industry fund returns.

Liquidating properties when reaching a certain threshold allows for reinvesting the original capital along with profits into multiple properties.

Strategies for Successful Property Investment in Superannuation

The speaker discusses successful strategies for property investment within an SMSF. They highlight the importance of not being afraid to liquidate properties once a certain profit threshold is reached and using the funds to purchase additional properties. They contrast this approach with risky investments outside the intended purpose of superannuation.

Strategies for Successful Property Investment

Successful investors in property within an SMSF are willing to liquidate properties once they reach a certain profit threshold.

By reinvesting the original capital along with profits from previous sales, it becomes possible to purchase multiple properties.

Some individuals have accumulated over 50 properties within their SMSFs by constantly buying, selling, and building up capital.

It is important to avoid risky investments outside the intended purpose of superannuation and focus on slow but steady wealth growth.

Caution Against Risky Investments in Superannuation

The speaker cautions against making risky investments in superannuation funds. They mention examples such as investing in cryptocurrencies or unconventional assets that may not align with conservative wealth-building goals. They emphasize that superannuation should be treated as a tax-effective and long-term wealth creation strategy.

Caution Against Risky Investments

Some individuals make risky investments in superannuation funds, such as cryptocurrencies or unconventional assets.

These investments may not align with the conservative and slow-burning nature of superannuation as a wealth-building strategy.

Superannuation should be treated as a tax-effective and long-term approach to grow wealth steadily.

Importance of Superannuation for Retirement Planning

The speaker emphasizes the importance of considering superannuation early on for retirement planning. They highlight the benefits of having a substantial amount saved in superannuation, which provides financial security during retirement. They also mention the tax-free earnings that can be generated during pension phase.

Importance of Superannuation for Retirement Planning

Superannuation plays a crucial role in retirement planning and should not be neglected until later stages of life.

Having a substantial amount saved in superannuation provides financial security during retirement.

Tax-free earnings can be generated during the pension phase, allowing for additional income without taxation.

Building up a healthy superannuation balance ensures peace of mind and allows for more comfortable everyday investing.

Longevity and Balancing Enjoyment with Financial Security

The speaker discusses the increasing lifespan of individuals and the need to balance enjoyment while ensuring financial security in older age. They encourage finding a balance between enjoying life while still considering the possibility of working at an older age. It is important to start nurturing superannuation early on to achieve higher returns.

Balancing Enjoyment with Financial Security

People are living longer compared to previous generations, so it is essential to consider both enjoyment and financial security in older age.

While it's important to have fun when young, it's also necessary to plan for the possibility of working at an older age.

Nurturing superannuation early on is crucial for achieving higher returns and building a healthy retirement fund.

Types of Properties for SMSF Investments

The speaker discusses the types of properties that are commonly considered for investment within SMSFs. They mention that investment strategies may vary depending on age, with younger individuals often opting for higher loan-to-value ratios (LVRs). The speaker highlights the importance of tailoring investment strategies to individual circumstances.

Types of Properties for SMSF Investments

Investment strategies for property within SMSFs may vary depending on age.

Younger individuals often opt for higher loan-to-value ratios (LVRs) when considering property investments.

It is important to tailor investment strategies to individual circumstances and goals within an SMSF.

New Section

In this section, the speaker discusses the importance of pivoting and rebalancing wealth from balance sheet assets to profit and loss (P&L) assets. They emphasize the need to focus on cash flow assets for generating income and paying bills.

Pivot and Rebalance

The speaker highlights the need to pivot and rebalance wealth from balance sheet assets to P&L assets.

Growth on a balance sheet is good, but it doesn't pay the bills. It's the P&L that generates cash flow.

Selling growth assets like residential properties and investing in commercial properties can provide both growth and cash flow.

Commercial property investments are attractive due to their cash flow nature, especially with higher interest rates in superannuation funds.

New Section

This section focuses on choosing the best possible asset for investment strategy, whether it's residential or commercial property or other asset classes. The speaker emphasizes taking action rather than waiting too long.

Choosing the Right Asset

There is no right or wrong asset class; it depends on individual investment strategies.

The key is to invest in the best possible asset that can generate a good return within one's affordability.

Residential or commercial properties can be suitable options, depending on factors such as cash flow nature, income generation, lease growth, and property value appreciation.

It is important not to delay investment decisions but execute them based on one's strategy.

New Section

This section discusses how maintenance and renovations are paid for in self-managed super funds (SMSFs). It emphasizes the importance of having buffers in place to cover periods when a property may not be rented.

Maintenance and Renovations in SMSFs

Maintenance and renovation expenses come out of the cash balance of the SMSF.

It is crucial to have buffers in place to cover loan repayments and holding costs during periods when a property may not be rented.

The initial balance of the SMSF is important, as starting with a low balance can limit future potential value.

New Section

This section explores the possibility of renovating properties within self-managed super funds (SMSFs) and highlights certain limitations. It also discusses borrowing for construction or renovations in superannuation.

Renovations in SMSFs

Renovations can be done within an SMSF using the cash balance of the fund.

However, it is not possible to borrow for construction or renovations in superannuation.

Equity release strategies are not applicable in SMSFs, so any money invested into property should aim to generate extra revenue or increase future selling value.

New Section

This section addresses refinancing and extracting equity from properties held within self-managed super funds (SMSFs). It explains that refinancing and increasing debt or extracting equity are not allowed in SMSFs.

Refinancing and Extracting Equity

Refinancing properties within an SMSF is not possible, as there is no concept of refinancing or increasing debt.

Extracting equity from properties held within an SMSF is also not allowed.

Banks do not allow refinancing or extracting equity from properties held within an SMSF.

New Section

This section discusses limitations on subdividing properties held within self-managed super funds (SMSFs) due to limited recourse buying arrangements. It also mentions restrictions on loans for granny flats.

Subdividing Properties in SMSFs

Subdividing a property within an SMSF is possible if it's owned outright without any custodian or bare trust attached to it.

However, there are limitations when loans are involved, especially with granny flats.

Borrowing for granny flats in SMSFs is not allowed for construction purposes. The loan amount is fixed, and the focus is on paying down the debt.

New Section

This section explains how offset accounts can be used within self-managed super funds (SMSFs) to reduce loan amounts while saving for future property deposits.

Offset Accounts in SMSFs

Offset accounts can be attached to loans within an SMSF, allowing for savings while reducing the loan amount.

By building up an offset account, individuals can save for future property deposits while simultaneously decreasing the loan balance.

Procedure for Buying Property in a Self-Managed Super Fund

The speaker discusses the procedure for buying property in a self-managed super fund (SMSF) and the importance of having a good solicitor, accountant, and financial planner involved in the process.

Buying Property in SMSF

Multiple properties can be owned by an SMSF over time.

A new bare trust is required for each property purchase.

The custodian entity can be re-utilized for multiple purchases.

The bare trust is address-specific and varies based on state regulations.

In New South Wales, the bare trust is created at the time of contract assignment.

In Queensland, the bare trust is created prior to signing the contract and specifies the property's address.

Legal Considerations

Under limited recourse borrowing arrangements, the asset is transferred to the SMSF once the debt is fully paid off.

It is crucial to have a good solicitor, accountant, and financial planner involved due to legal complexities.

In Queensland, it is important to ensure correct names are used on contracts to avoid complications with stamp duty.

Subdividing Property in an SMSF

The speaker explains why subdividing property within an SMSF can be challenging due to specific regulations related to limited recourse borrowing arrangements.

Challenges with Subdivision

When subdividing a property purchased through an SMSF, creating new titles may not fall under limited recourse borrowing arrangements.

Banks have not found a way around this issue yet, as it potentially breaches rules set by legislation such as the SIS Act.

Professionals often advise against subdivisions within an SMSF due to complications and potential non-compliance.

Building Wealth through Multiple Properties in an SMSF

The speaker discusses strategies for building wealth through multiple property purchases in an SMSF and the importance of balancing the portfolio.

Building Wealth

Accumulate funds over time to purchase multiple properties within an SMSF.

Allocate a portion of funds as a deposit and borrow the rest.

Regularly contribute additional funds to the SMSF to continue purchasing properties.

Balancing the portfolio and being active in strategy adjustments is crucial for long-term growth.

Transitioning from Asset Wealth to Cash Flow in Retirement

The speaker emphasizes the importance of transitioning from asset wealth to cash flow in retirement, ensuring a comfortable lifestyle.

Transitioning Strategies

As retirement approaches, focus on converting asset wealth into cash flow.

Having a high net asset position in superannuation (super) is not enough; it should translate into sufficient cash flow for retirement.

Being asset-rich but cash-flow poor can lead to difficulties during retirement.

Making early decisions to pivot and convert assets into real cash wealth is essential for enjoying retirement.

Key Considerations for Retirement Planning

The speaker highlights key considerations for retirement planning within an SMSF.

Retirement Planning

Ensure that retirement planning focuses on both balance sheet wealth and profit and loss (P&L) wealth.

Aim for a comfortable lifestyle with sufficient cash flow rather than just accumulating assets.

Strive for a well-balanced portfolio that aligns with changing strategies over time.

Understanding the Goal of Property Investment

The focus should be on buying properties that will grow over time rather than flashy properties with lots of depreciation benefits. Tax benefits from depreciation are only 15 cents in the dollar.

Importance of Making Money and Low Tax Environment

The goal should be to make money rather than focusing on depreciation or tax deduction benefits.

It is important to consider how money is earned, taxed, and the low tax environment when making investment decisions.

Balancing Strategy as an Investment Savvy Broker

There needs to be a balance between strategy and considering individual circumstances when determining what type of assets to invest in. Potential unrealized taxing events may impact certain individuals.

Impact of Potential Unrealized Taxing Events

Labor legislation may introduce a potential unrealized taxing event for balances over three million dollars.

This may affect a small minority initially but could impact more people over time.

Going concern becomes a major factor, especially for super funds with high interest rates and reduced contributions.

More capital may be required to maintain assets, and there can be audit issues related to going concern.

Importance of Strategy and Involvement in Superannuation

It is crucial to have a strategy and actively participate in managing your superannuation. Treating it like a business can lead to better retirement outcomes.

Strategy and Time Involvement

Superannuation requires strategy, not just from a tax perspective but also in terms of treating it seriously as a business.

Spending one to four hours per week on managing superannuation is recommended for those who want to get involved.

Being intimate with numbers and understanding how the super fund is performing is essential.

Professionals can provide ideas for improvement, but relying solely on them without personal involvement is not advisable.

Living in an SMSF Property

There are rules and restrictions regarding living in a self-managed super fund (SMSF) property. Benefits cannot be obtained prior to retirement.

Rules Regarding Living in an SMSF Property

Arms-length distance transactions and receiving benefits from an SMSF property before retirement are not allowed.

Living in an SMSF property while paying rent is not permissible.

Benefits from the super fund can only be accessed after retirement.

The transcript provided does not include any timestamps beyond 1:10:32.

Rules for Investing in Self-Managed Super Funds

In this section, the speaker discusses important rules and considerations when investing in self-managed super funds.

Rules for Owning Property

There are rules regarding owning property in a self-managed super fund.

Classic cars or other vehicles cannot be purchased for personal use and must be stored off-site.

Artwork can be purchased as an investment but should not be displayed in personal spaces.

Borrowing Conditions

When using cash to purchase a property, there are no borrowing conditions.

If the property is bought through the self-managed super fund, it can be subdivided without restrictions.

It is important to demonstrate that any property-related activities are for investment purposes and not treated as a business.

Restrictions on Residential Properties

Residential properties cannot be purchased by a self-managed super fund.

Commercial properties can be bought and sold within the fund.

Selling Properties to Self-Managed Super Fund

Selling residential properties to a self-managed super fund is not allowed.

Selling commercial properties to the fund is possible but requires proper documentation and substantiation.

Foreign Distance Transactions and Buying Property

This section covers rules related to foreign distance transactions and buying property through a self-managed super fund.

Foreign Distance Transactions

Foreign distance transactions are prohibited when purchasing residential properties through a self-managed super fund.

However, commercial properties can still be acquired through such transactions.

Buying Property from Self-Managed Super Fund

It is generally frowned upon to buy a property from your own self-managed super fund.

The tax office scrutinizes such transactions, so it's advisable to avoid them if possible.

Utilizing Profits and Minimizing Capital Gains Tax

This section discusses utilizing profits from property sales and minimizing capital gains tax through super contributions.

Utilizing Profits from Sale

Profits from property sales can be utilized by salary sacrificing them into super contributions.

This strategy can help reduce tax obligations and increase the amount of cash going into the super fund.

Minimizing Capital Gains Tax

By making deductible contributions to a self-managed super fund, individuals or corporate entities can minimize capital gains tax.

This tactic requires proper documentation and adherence to contribution rules.

The transcript is already in English, so there is no need to translate it.

Super Fund and Enterprise

The speaker discusses the limitations of a super fund carrying on an enterprise. They explain that while individuals can engage in developments and make profits, buying a property in a super fund for profit-making purposes is not allowed. However, if the property is held for a long time without any bank loans attached to it and is subsequently rezoned or subdivided, it may not be considered as carrying on an enterprise.

Super Fund Limitations

A super fund cannot carry on an enterprise.

Individuals can engage in developments and make profits.

Buying a property in a super fund for profit-making purposes is not allowed.

If the property is held for a long time without any bank loans attached to it and is subsequently rezoned or subdivided, it may not be considered as carrying on an enterprise.

Limited Recourse Borrowing Structure

The speaker explains that limited recourse borrowing structure was designed to address the issue of super funds not being able to have debt for an asset. They emphasize the importance of seeking advice from accountants and professionals before engaging in such structures due to potential legislative changes.

Limited Recourse Borrowing Structure

Limited recourse borrowing structure was developed to address the issue of super funds not being able to have debt for an asset.

Seeking advice from accountants and professionals is crucial before engaging in such structures due to potential legislative changes.

Self-managed Superfund World

The speaker reassures that self-managed superfunds are not as complicated or scary as they may seem. They highlight the importance of education, guidance from professionals, and allocating time to develop the right investment strategy.

Self-managed Superfund World

Self-managed superfunds are not as complicated or scary as they may seem.

Education and guidance from professionals are crucial.

Allocating time to develop the right investment strategy is important.

Benefits of Commercial Property Investing

The speaker discusses the benefits of commercial property investing, including cash flow positivity from day one, potential for property to pay itself off over 10 years, high net yield (6-10%), and significant value growth. They also emphasize the importance of expert due diligence and hiring professionals to de-risk investments.

Benefits of Commercial Property Investing

Commercial properties are often cash flow positive from day one.

Properties can potentially pay themselves off over 10 years.

High net yield (6-10%) can be expected.

Commercial properties have significant value growth potential.

Expert due diligence is crucial for de-risking investments.

Hiring professionals can help in making informed decisions.

Steve Policy - Expert Due Diligence

The speaker introduces Steve Policy, an expert in commercial property investing with extensive experience and expertise in conducting due diligence. They highlight Steve's skills in analyzing numbers and finding the best properties in prime locations. A discount offer on Steve's book on commercial property investing is mentioned.

Steve Policy - Expert Due Diligence

Steve Policy is an expert in commercial property investing with extensive experience.

He excels at conducting due diligence and analyzing numbers.

Steve helps find the best properties in prime locations.

A discount offer on his book on commercial property investing is available.

Q&A Session

The speakers invite questions and comments from the audience. They mention that Jeremy has limited time due to just arriving from a flight and will answer as many questions as possible.

Q&A Session

Questions and comments from the audience are invited.

Jeremy has limited time due to just arriving from a flight.

They will answer as many questions as possible.

Conclusion and Call to Action

The speaker mentions that Jeremy has provided valuable information throughout the session. They encourage viewers to take advantage of the knowledge shared and consider purchasing Steve Policy's book on commercial property investing, offering a 50% discount with a provided code.

Conclusion and Call to Action

Jeremy has provided valuable information throughout the session.

Viewers are encouraged to take advantage of the shared knowledge.

A 50% discount is available for Steve Policy's book on commercial property investing.

Understanding Pyg Variations and its Benefits

In this section, the speaker discusses the concept of Pyg variations and how it can benefit property portfolio holders in terms of cash flow management.

Pyg Variations Explained

Pyg variations refer to a method of spreading out tax benefits throughout the year instead of receiving a lump sum refund at the end of the year.

By submitting a pyg variation through the tax office and employer, less tax is withheld from your income, resulting in increased net income in your pay cycles.

This approach helps property owners maintain their portfolios during high-interest rate cycles by providing additional cash flow throughout the year.

Importance of Cash Flow Management

Cash flow is crucial for holding properties during periods of higher growth.

Spreading out tax benefits helps avoid having to sell properties to cover expenses or relying on a large lump sum refund at the end of the year.

The ability to hold properties without financial strain allows investors to benefit from potential high growth in property values.

Calculating Tax and Potential Penalties

When applying for a pyg variation, it is essential to accurately estimate your income and associated expenses for forward guidance.

The pyg variation will calculate the appropriate amount of tax that needs to be withheld based on these estimates.

If you underestimate your expenses or overstate them significantly, you may face penalties and fines from the government.

It is advised not to try to manipulate or abuse the system but rather provide accurate information for an honest reflection of your financial position.

Cash Flow vs. Capital Growth in SMSF Investments

In this section, the speaker addresses a question regarding whether it is better to focus on high-yielding investments with positive cash flow or prioritize capital growth when investing in a self-managed super fund (SMSF).

Evaluating Rate of Return

While cash flow is important, it is crucial to consider capital growth when assessing the overall rate of return on an investment.

A property with high positive cash flow may seem attractive, but if another property with lower cash flow experiences significant capital growth, the latter may provide a higher overall benefit.

Balancing Cash Flow and Capital Growth

It is essential to strike a balance between cash flow and capital growth when making investment decisions.

A property that offers both positive cash flow and potential for capital growth would be an ideal choice.

Simply focusing on high-yielding investments without considering long-term appreciation may limit the overall returns on an SMSF investment.

The transcript provided does not contain any timestamps beyond 1:26:50.

The Importance of Investing at the Right Time

This section discusses the significance of making investments at the right time based on one's investment strategy.

Investing for Long-Term Wealth Accumulation

Making timely investments can result in significant differences in wealth accumulation.

Even a small amount invested consistently over time can lead to substantial net equity.

Cash flow strategies are beneficial, but it is crucial to ensure the best level and rate of return for investment decisions.

The Benefits of Superannuation (Super) Investments

Superannuation offers tax benefits that contribute to wealth accumulation.

By maximizing contributions without considering investment returns, individuals can gain a 15% increase in wealth through tax benefits alone.

Regardless of age or time frame, contributing to Super is recommended due to its long-term performing returns and tax advantages.

Considerations for Investing in Superannuation

This section addresses questions related to investing in superannuation and provides insights into who should consider it and why.

Investing in Super regardless of Time Frame

There is no one rule regarding the ideal time frame for investing in superannuation.

Even with shorter time frames, investing in super is still recommended due to the tax benefits gained from a lower tax rate on contributions compared to personal income tax rates.

Self-Managed Super Fund (SMSF)

SMSFs may not be suitable for individuals planning to move outside Australia before retirement due to trustee responsibilities and tax residency status considerations.

SMSFs are ideal for those who want more control over their investments and believe they can achieve better results than industry or retail funds.

Asset Classes for SMSF Investments

Apart from property, SMSFs can invest in various asset classes such as classic cars, artwork, gold, silver bullion, jewelry, cryptocurrency, shares, managed funds, ETFs, and overseas investments.

Any investment that provides a benefit for retirement can be considered within an SMSF but cannot be utilized or have benefits before retirement.

Unconventional Asset Classes for SMSF Investments

This section explores unconventional asset classes that can be considered for self-managed super fund (SMSF) investments.

Unconventional Asset Classes

In addition to traditional assets like property and shares, SMSFs can invest in unconventional asset classes such as classic cars, artwork, gold, silver bullion, jewelry (if considered an investment), cryptocurrency.

Overseas investments can also be part of an SMSF's investment strategy.

It is important to understand the risks associated with each asset class before investing.

Managing an SMSF with Age Differences and Property Investment

This section addresses questions related to managing a self-managed super fund (SMSF) when there is a significant age difference between members and considerations for property investments.

Managing an SMSF with Age Differences

Different investment strategies may be required within the same SMSF when one member aims to accumulate wealth while another plans for retirement.

The fund does not need to sell a property when one member retires unless it aligns with their overall investment strategy.

The SMSF continues in its current form even if members have different goals or timelines.

Timestamps are provided in the format HH:MM:SS, where HH represents hours, MM represents minutes, SS represents seconds, and XXXX represents the number of seconds.

Investing in Property within a Self-Managed Super Fund

The transcript discusses the process of investing in property within a self-managed super fund (SMSF), including the importance of balancing members' contributions, converting funds to pension phase, and complying with regulations.

Investing in Property within an SMSF

Concessional contributions from members can be used to invest in property within an SMSF.

When a member retires, their portion of the fund can be converted to pension phase.

It is crucial to prepare for mandatory withdrawals from superannuation funds during retirement.

Failure to prepare for mandatory withdrawals may result in having to sell the property and risk contravening super fund regulations.

Upon the death of a member, the remaining balance is paid out according to their will or binding nomination.

Financial planners can provide valuable assistance by helping individuals understand risk profiles and navigate complex financial matters.

Investing in Property Outside Australia with an SMSF

This section explores the possibility of investing in property outside Australia using an SMSF. Considerations such as investment returns, government volatility, and ease of accessing funds are discussed.

Investing in Property Outside Australia

It is possible to invest in property outside Australia using an SMSF.

However, various factors need consideration before making such investments, including investment returns and government stability.

Accessing funds invested abroad may pose challenges that need careful evaluation.

Compliance with audit requirements ensures adherence to regulations governing SMSFs.

Staying Compliant with Super Fund Regulations

This section emphasizes the importance of staying compliant with super fund regulations and avoiding gray areas. It also highlights the role of financial planners in providing guidance and ensuring adherence to the law.

Staying Compliant with Super Fund Regulations

It is crucial for SMSF trustees to remain conservative and avoid gray areas in super fund regulations.

Compliance with the Corporations (CIS) Act and other laws is essential.

External auditors review SMSF information to ensure compliance.

Non-compliance can lead to deregulation of the fund and potential contraventions.

Financial planners play a vital role in providing guidance, risk profiling, and ensuring adherence to regulations.

Conclusion and Acknowledgment

The section concludes the discussion by expressing gratitude for the valuable insights provided. Information on accessing more resources from Jeremy's firm is also shared.

Conclusion and Acknowledgment

The podcast concludes with appreciation for the informative discussion.

Jeremy's contact details are provided for those interested in learning more about his services.

Jeremy has been involved with Oz Property Group as an early member and continues to contribute valuable insights.

The podcast will be uploaded on YouTube for easy access.

Timestamps may not be available for every bullet point due to limitations in the transcript.