Self-managed Super Funds can save our Medicos

THE BAREFOOT BROKER with JASON KHOURY

With a couple of major hospitals in TWT territory, doctors and medical professionals are in ample supply.

And they pay a lot in tax, perhaps too much. Tax legislation restricts their use of discretionary trusts and similar entities, so they generally cop it sweet.

But there’s still stuff they can do and iChoice has been able to help many doctors and medical professionals because we love helping those who spend their lives helping others.

Because they understand and respect the specialist framework in their own profession, they are particularly receptive to specialist financial advice.

Dr Craig and Mrs Diane (not their real names) have just left my office very happy indeed.
They have a commercial loan of $1.4m owing on their surgery that receives rent of $180K per annum from their business.

We just signed docs to refinance this loan, using their owner-occupied property as collateral, so they can get a variable rate of 3.59% (with a 2.18% lifetime discount). This will immediately save them more than $18,000 a year in interest.

And my accountant is calling them later today to discuss setting up a SMSF to acquire this surgery. Even though it’s worth $3m, the stamp duty to switch it across is only $500 because it’s currently held in their personal names and is NSW business real property.

Rather than paying 45% tax on the rent, the 15% tax rate inside Super will save them $54,000 every year.

So when they hang their boots up, their SMSF tax rate will be reduced to 0%, saving them $81,000 each year.

Our iChoice premises was bought through an SMSF last year. Since I’m 48, by the time I’m 63, I’ll have be able to draw a pension of $90,000 (based on today’s dollars). So this measure certainly ticks the ‘asset protection’ box.

It’s the different tax treatment that makes going down this path so financially advantageous. If it wasn’t so absolutely legal and acceptable, you’d call it a scam.

Knowing the whole picture makes a huge difference to what tweaks I can recommend to put you in a better financial position, so give me a buzz if you’d like some guidance or to run anything past me on 0400 900 300 – there’’s no charge.

Something (off-topic) I need to get off my chest: The words “to be honest” before a statement is something I’ve encountered a lot lately – it gives the impression they pick and choose when they’re going to be honest!
If you feel yourself about to say it, do yourself a favour and change it to “to be frank”. That is, unless your name is Frank – that might get weird.

I’m really enjoying meeting so many TWT readers and would like to thank those who’ve allowed me to help them save some money on their loans, for their trust and support.

Comparison Rates Don’t Give Aussies Enough Credit

THE BAREFOOT BROKER with Jason Khoury

Comparison Rates were rolled out by ASIC with good intentions but have turned out to be quite useless, so I’ll continue to lobby for their removal on the basis they’re just not real.

A Comparison Rate (CR) is a made-up, notional & unrealistic ‘rate’ which tries to include ongoing fees into the actual interest rate, in a rudimentary effort to estimate the true cost of a loan.

It’s like a car salesman giving you a price on a car that wraps up their estimate of fuel and repairs in the next few years.

If you have a mortgage you probably pay an annual ‘Package Fee’ of around $395 per annum, which means you pay no other ongoing fees.

For an $800,000 mortgage, a $395 annual fee is the equivalent of only 0.05% on top of the rate.

So why the big difference between the actual & Comparison rates? It’s because the advertised comparison rates must be calculated on the assumption of a $150,000 loan.

On a small loan like that the annual fee represents a whopping 0.26% – so a packaged is usually not recommend on such a small amount and you don’t need to be a rocket scientist to see this is deceptive.

The annual Package Fee also includes the annual fee waiver for a Platinum credit card – which might normally be $179. Is this factored into the CR? No.

Many of my clients get the benefits of running dual offset accounts. These are free too. Are these savings included in the CR? No.

For clarity, the true costs of a loan depend on three things you need to ask your broker:

    1. SET UP COSTS: “what is the total cost, to the cent, to set up this loan/refinance? Is there a rebate?”
    2. ONGOING FEES: “What are the ongoing annual (or monthly) fees?”
    3. RATE: “Including any lifetime discount, what is the actual rate?”

Ask your broker for a 10-year Cost Comparison Projection taking the three things above into account.

Ten years will iron out any initial rebate, discounted first year rate and all that nonsense.

Here is an example relating to Dr Elle from Woolwich where I am refinancing her investment loan from CBA to another bank where I’ve negotiated a variable rate of 3.59%, which saves Elle over $8,000 per year.

And here is the comparison I provided her, which is much more meaningful than a Comparison Rate.

I want to make something really clear – iChoice sounds like a franchise, but it isn’t. It’s a family business and there are no banks who own it with me.

The fact that iChoice is the only non-franchise brokerage to be ranked by in the MPA Top 10 brokerages in Australia and number one in NSW, warms my heart.

It’s happened very quickly. I was a sole trader 3 years ago and have since employed 4 staff and have a second office.

How did I do it? The trick is to be able to clearly explain things to people without all the jargon and sales-talk we all get sick of. I keep it real, unlike the banks, that ramble on about features.

I concentrate on the benefits that these features provide, taking into account the client’s unique situation and measure success by the number of people I’ve helped, not by volumes and certainly not by income.

I’m honest with a genuine passion to help others get safely ahead and I find it hard to distinguish between friends and clients, because I treat everybody in my life the same.

My team – Victoria, Alexia and Maroun – have driven our growth, using the same principles I’ve outlined and are capable and compassionate people I’m proud to have among my dearest friends.

Get in touch with me – Jason – on 9743 0000 or 0400 900 300.

On a totally unrelated subject, I took the kids for lunch on the weekend at the café in Ryde Park. It’s just so beautiful there. Maybe I should host a sausage sizzle for all TWT readers one day – stay tuned for more on that.

Comparison Rates Don’t Give Aussies Enough Credit

THE BAREFOOT BROKER with Jason Khoury

Comparison Rates were rolled out by ASIC with good intentions but have turned out to be quite useless, so I’ll continue to lobby for their removal on the basis they’re just not real.

A Comparison Rate (CR) is a made-up, notional & unrealistic ‘rate’ which tries to include ongoing fees into the actual interest rate, in a rudimentary effort to estimate the true cost of a loan.

It’s like a car salesman giving you a price on a car that wraps up their estimate of fuel and repairs in the next few years.

If you have a mortgage you probably pay an annual ‘Package Fee’ of around $395 per annum, which means you pay no other ongoing fees.

For an $800,000 mortgage, a $395 annual fee is the equivalent of only 0.05% on top of the rate.

So why the big difference between the actual & Comparison rates? It’s because the advertised comparison rates must be calculated on the assumption of a $150,000 loan.

On a small loan like that the annual fee represents a whopping 0.26% – so a packaged is usually not recommend on such a small amount and you don’t need to be a rocket scientist to see this is deceptive.

The annual Package Fee also includes the annual fee waiver for a Platinum credit card – which might normally be $179. Is this factored into the CR? No.

Many of my clients get the benefits of running dual offset accounts. These are free too. Are these savings included in the CR? No.

For clarity, the true costs of a loan depend on three things you need to ask your broker:

  1. SET UP COSTS: “what is the total cost, to the cent, to set up this loan/refinance? Is there a rebate?”
  2. ONGOING FEES: “What are the ongoing annual (or monthly) fees?”

  3. RATE: “Including any lifetime discount, what is the actual rate?”

Ask your broker for a 10-year Cost Comparison Projection taking the three things above into account.

Ten years will iron out any initial rebate, discounted first year rate and all that nonsense.

Here is an example relating to Dr Elle from Woolwich where I am refinancing her investment loan from CBA to another bank where I’ve negotiated a variable rate of 3.59%, which saves Elle over $8,000 per year.

And here is the comparison I provided her, which is much more meaningful than a Comparison Rate.

I want to make something really clear – iChoice sounds like a franchise, but it isn’t. It’s a family business and there are no banks who own it with me.

The fact that iChoice is the only non-franchise brokerage to be ranked by in the MPA Top 10 brokerages in Australia and number one in NSW, warms my heart.

It’s happened very quickly. I was a sole trader 3 years ago and have since employed 4 staff and have a second office.

How did I do it? The trick is to be able to clearly explain things to people without all the jargon and sales-talk we all get sick of. I keep it real, unlike the banks, that ramble on about features.

I concentrate on the benefits that these features provide, taking into account the client’s unique situation and measure success by the number of people I’ve helped, not by volumes and certainly not by income.

I’m honest with a genuine passion to help others get safely ahead and I find it hard to distinguish between friends and clients, because I treat everybody in my life the same.

My team – Victoria, Alexia and Maroun – have driven our growth, using the same principles I’ve outlined and are capable and compassionate people I’m proud to have among my dearest friends.

Get in touch with me – Jason – on 9743 0000 or 0400 900 300.

On a totally unrelated subject, I took the kids for lunch on the weekend at the café in Ryde Park. It’s just so beautiful there. Maybe I should host a sausage sizzle for all TWT readers one day – stay tuned for more on that.

The Barefoot Broker: Helping blind people around the world

HAVING won Best Small Brokerage in NSW, iChoice at Concord West is always looking for new ways to build on its relationships with clients, the industry and the broader community, including philanthropic initiatives – so it’s with great pride that we announce that iChoice has become an official Corporate Partner of the Fred Hollows Organisation.

“Ever since I heard a few years ago that there are blind people around the world that can have their eyesight restored, we’ve wanted to get involved,” iChoice principal, Jason Khoury, said.

“We’re now in a position where we can help thousands of people see again which is a massive buzz, I’m sure all our supporters and clients will be thrilled with this.”

The Organisation recently welcomed the iChoice team for morning tea, joined by CEO Brian Doolan and one of Australia’s ‘100 Living Treasures’, Gabi Hollows AO. They both joined Jason and his family for a quick snap.


Banking Royal Commission Shaking Things Up

THE MAJOR Australian banks’ financial advisers are copping it, as we continue to hear their customers’ interests have not always underpinned their recommendations in a Banking Royal Commission that has so far exposed shocking conduct.

It’s disgusting and it’s now obvious that this inquiry was needed to clear the air.

People are now understanding that banks are loyal to their shareholders and not their customers – confusing, as we assume banks have a moral obligation to look after us.

After a career working in four banks, I see things from a different perspective.

Mortgage brokers seem to be coming out of the hearings OK, although there was some concern over credit advisers recommending that people borrow more than they need.

For example, if a couple was looking to refinance their $500K mortgage – secured by a $1.5M home – a mortgage broker might suggest borrowing an extra $700K, if the bank’s servicing calculator permitted.

This could be set up as a line of credit, or as ‘Loan B’, with its very own offset account.

For clarity, either way, it would mean that there would be no interest paid on this ‘cash out’ unless it was actually used.

 

The negatives

Let’s first look at the potential negative outcomes.

I refer to a question we at iChoice always ask in our 34-bullet-point questionnaire, in which respondents rate each item with a “1”, “2”, “3”, “4” or “5”.

The question is: “How do you rate your financial responsibility; that is, your ability to not spend money just because it is available to you via redraw of offset?”

If they tick 1, 2 or 3, it may be the signs of a ‘spendaholic’, or an indication of some other dependency, like enjoying a punt. In this case, a mortgage broker must respect that the client probably doesn’t need to see $700K available to them every time they go to an ATM.

If it’s all in an offset account, the balance will show on the screen as “$700,000 CR”. This can be misleading. It’s not theirs to spend willy-nilly: it’s their equity in their home and if they spend it, they’re increasing their effective debt.

 

Potential benefits

Now let’s look at the benefits of ‘equity unlocking’. In the example above, this couple now has $700K they can spend at any time in the future, just by cutting a cheque.

If they wanted to renovate their home, buy a car, build a pool, help the kids or go on a holiday, and need some cash to do so, they don’t need to go through the hassle of another loan application to get extra cash – it’s all sitting there.

Imagine if, in a couple of years, their circumstances change – they may not be able to use their equity and won’t get the $700K approved!

There’s an even bigger benefit. Let’s say they wanted to buy an investment property.

Firstly, they can cut a 10% cheque at auction, without the need for an expensive ‘Deposit Bond’.

But if the property is being sold for $600K, they can offer great terms to the vendor. For example, they could offering only $550K, because they can grab their money from their offset account and buy the property and it can settle in a matter of days.

They can do this by using ‘Loan B’ to fund it all, without charging the new property to the bank. So, it’s great to have an investment that is unencumbered.

This is so powerful because the settlement term – normally 6 weeks – is a negotiating point just like the selling price.

Having all the funds available works wonders for deceased estates and divorce sales, where vendors just want to get their hands on their money and move on.

Combine this with a December sale and it’s even more powerful. Vendors love the idea of being able to settle before the holidays. Christmas does funny things to people.

Most banks won’t allow you to ‘unlock’ $700K without an immediate purchase on the cards, and even if they do, they’ll charge the ‘investment rate’ on that portion (Loan B).

Luckily, there are a couple of banks that will do both ‘Loan A’ and ‘Loan B’ at the owner-occupied rate of 3.70%. A no-brainer if you consider yourself financially responsible and want the maximum flexibility to get ahead.

At iChoice, if you tick 1, 2 or 3 for the question above, we won’t even speak to you about the benefits of unlocking equity, respecting that it might not be right for you.

What a shame the banks aren’t as responsible as we are. I guess that’s why there’s a Royal Commission. So for advice that’s right for you, rather than the banks, speak to us.

The Barefoot Broker, Jason Khoury, is the Managing Partner of the award-winning Concord West-based iChoice and can be contacted on 9743 0000.

The BAREFOOT BROKER with JASON KHOURY: How to think about money

BESIDES being The Barefoot Broker, for 30 years I’ve been a student of Economics, Psychology, Statistics and Neuro Linguistic Programming.

Believe it or not, it all ties in together.

Kids out there, get stuck into any learning you can get your hands on – it all helps. You’d think that people who can refinance their mortgage to save money will consider it, right?

Well, not really. In fact, 80 per cent of people who have a mortgage or two know very well that they’re throwing money down the drain every month because their bank is ripping them off a little. So why don’t they get a broker – at no cost to them – to sort that out?

 

Illogicality

Is it logical that we shake hands when we meet someone, respecting an old custom intended to show we’re not bearing arms?

Is it logical that we’d never buy ‘no name’ nappies from a Supermarket? Of course not, which is why they don’t make them. Lets face it, we’re driven by emotion, rather than logic and the worst kind of emotion too – fear.

You see, our cavemen ancestors woke up every day fearing they’d get eaten by a tiger (PS: Go the Tigers!), rather than waking up planning something awesome.

Same goes today. We all fear losing a dollar, far more than getting excited about making a dollar.

 

Opportunity Cost

How economists measure what something costs, is called ‘opportunity cost’.

It’s the loss of other alternatives when one option is chosen.

It looks at the benefit/profit/value of something that must be given up to acquire something else. If you decided to clean your house last Saturday, rather than go to the beach, your day of cleaning came at a real economic cost, being the dollar value you attribute to a day at the beach.

Consider Sarah in a year’s time, next year in April 2019, who’s still paying 4.1 per cent on her $1m home loan, knowing full well that it could have been 3.59 per cent all year if she had bothered.

If you asked Sarah what she lost in the last year, she’d probably reply ‘nothing’.

An economist would say she LOST $5,100 cash in the past year (in fact a little more, looking at cumulative interest). You see, Sarah feels that she didn’t make a decision not to refinance.

But guess what, not making a decision is a decision. Because she didn’t look to refinance today, Sarah has made a decision not to look at refinancing and has today consciously forfeited $5,100 over the next year – her own little private donation to the big banks.

If today you’re not ready today to commit to go for a walk every night, is that cool? Sure it is, but you must own the fact that today you made a solid decision of ‘YES’ to ‘NOT’ to start walking at night. Sorry.

Let’s put 80 per cent of borrowers to the side – those that complain at barbecues about electricity and petrol prices but are more than happy to lose $5,100 every year on their home loan.

The Pareto Principle is another economic term noting that 20 per cent of people get the benefits, at the cost of the other 80 per cent (or that 80 per cent of effects come from 20 per cent of the cause).

In my working life I only deal with the 20 per cent. I simply don’t ever hear from the other 80 per cent, who are content to just stick with their existing situation.

My colleague and I have written over a quarter of a billion dollars in mortgages over the last 12 months for those who want to LEARN to bypass their fear of dealing with a mortgage broker and get ahead. Good for them. I wish I could get my little boys to learn to GET INFORMED so they can eat stuff on their plate that they don’t recognise!

I get warm and fuzzies by still having accounts at the CBA (I had a kids Passbook account when I was 5 too, what a great tactic), but sorry, my mortgages end up where my family will improve financially. Full stop, emotion aside.

Hold on, don’t get me wrong…if you attribute a real dollar value to the fact that your bank sponsors your favourite NRL team, by all means that IS logical, as long as you calculate it and then consciously decide its worth losing exactly that much money to you. Otherwise, you’re floating in the wind.

 

Not saving money, is losing money.

Anyway, as I started off saying, iChoice clients haven’t just refinanced to reduce their payments. They also get a fix part of their borrowings, unlock equity, mobilise for their next move, embrace dual offsets and restructure for a better tax and lifestyle outcome – and get 100 per cent free professional representation by iChoice, keeping them informed and helping them avoid mistakes in the future.

But for the 80 per cent of those staying put, my clients thank you for subsidising their interest rates; the banks couldn’t possibly be able to discount their interest rate by that much, if they had to do it for everyone! 80:20 must prevail!

The message this week is ‘i-Choice’ – that is, get informed to choose to get ahead faster. There’s nothing to fear but fear itself.
Not moving forward, is moving backwards. There is no stationary.

And for doctors, surgeons, police, firefighters, ambulance personnel, teachers and uni graduates, get in touch and I’ll knock your socks off with what’s specially on offer for you lot.

TWT’s The Barefoot Broker has studied at the University of Sydney, Australian Catholic University, The Australian Securities Institute, Intellitrain and The Mind Body Co.

Having contested and lost the 2015 State Election for the seat of Drummoyne, Jason remains the Managing Partner of the award-winning iChoice in Concord West and is available for any questions from all TWT readers this week on 0400 900 300.

 

 

Things to know about Lender Mortgage Insurance

The Barefoot Broker with JASON KHOURY: Lender Mortgage

This week, I’ve got five things about L.M.I (Lender Mortgage Insurance) that first home buyers definitely don’t know and their bank will never tell them.

Firstly, Lender Mortgage Insurance is an insurance policy taken by the bank for its own protection, that the borrower must pay for. Generally, it only applies when you need to borrow more than 80 per cent of the value of the property.

It’s just a one-off fee (which differs amongst all the banks) to be paid on settlement, when the bank will simply put it on top of the loan (capitalise).

Whilst LMI helps thousands of people get into homes faster, allowing people to not wait until they’ve saved the required 20 per cent, some ill-advised people don’t need to pay it at all or pay too much, so here we go:

It’s a little concerning that so many people borrow exactly 90 per cent and are happy to pay the required LMI stipulated by the bank’s online LMI calculator.

If only the banks explained the pricing thresholds.

Scenarios

Consider a property purchase price of $555,000: LMI costs $13,092 to borrow $500,000; LMI costs $ 9,354 to borrow $499,600.

So, by borrowing $400 less, you save $3,700!

It’s simply criminal that borrowers aren’t clearly made aware of the thresholds at work in the background.

Citibank lends up to 85 per cent without LMI! Other banks like Westpac also do from time-to-time. It’s a great option for those can scrape together the 15 per cent (plus stamp duty if applicable).

Professional sport players, accountants, lawyers and many medical professionals can borrow up to 90 per cent without LMI.

ANZ extend this offering to chiropractors (but not pharmacists).

At the same time, St George extends this to pharmacists, but not chiropractors!

Family Guarantors

If a borrower has a family member, perhaps a parent, who can provide a guarantee, that’s great.

Most don’t understand the simplicity of this. The parent only guarantees the bit the buyer doesn’t have to make the 20 per cent. That’s why it’s called a Limited Guarantee

In the example in Point 1 above, the parent would only need to guarantee an amount of $55,000, and that’s all they’re liable for if ever things went pear-shaped.

Presently, a parent can guarantee the whole 24 per cent, so the borrower can borrow the full purchase price and stamp duty too!

A kid can actually guarantee their parents too, at some banks.

If the guarantor has a home loan at a different lender, some banks are OK with this and will simply take a 2nd mortgage over their property, for the amount of the Limited Guarantee. Sometimes they add a 5% buffer.

In the future, the parent’s guarantee will be completely removed once the borrower’s loan amount represents 80% of the property’s value. This could be because the loan has been reduced, or the property has gone up in value (valuations are free).

Some banks don’t mind if the Guarantor is retired… but watch this space (hint hint).

We just helped Sally buy an apartment last month. She is so cranky that her NAB mobile banker told her 3 years ago that her mum couldn’t go guarantor because she didn’t work, and she believed this. She was out of the market for the last few years which has cost her at least $200K.

If someone has bought a place off-the-plan for $555,000, and they only have 10% deposit, they’ll need to pay LMI with most lenders.

But some banks will re-value the property on completion, and if it’s gone up by 10%, it’s now an 80% loan effectively so no LMI is payable! They must know if their bank goes off the lower of purchase price or valuation.

Banking Royal Commission

I think it’s great that the banking system is being thoroughly investigated because there are so many things that aren’t fair, I see it every day. I’m hoping the Commission also addresses why those people who go direct to their lenders themselves (for some perceived concept of loyalty), get taken advantage of every day.

Also, I don’t see too many people go broker from buying property. I hope attention soon gets to how banks market and issue credit cards, which is outrageous & currently completely unregulated.

Advice for younger credit consumers

Credit Cards are for convenience and to get free Qantas flights only. You can tick a box so that every 55 days the full amount due is swept in full from your offset or savings account. Just because your bank manager doesn’t tell you to do this automatically, please ask for the form, it’s normally the third and last box you need to tick

Your bank will never email you a link for you to click to go to your online banking. Do not fall for this, or a computer on the other side of the world will know which buttons on your keyboard are being pressed.

I’ve spent 20 years perfecting my craft, buying plenty of properties myself, and love helping all our clients get ahead safely with the right advice around ownership structures, land tax, asset protection and flexible lending structures.

Why some choose to deal with the 25-year-old at the bank with one credit policy, re-classification policy and one interest rate is fascinating to me. And sorry to the 25-year-old bankers out there – I was you once.

The percentage of Australians doing that is in steep decline, in small part, due to our clients sharing their iChoice experiences with others (particularly those in the medical industry) – a warm thank you to you all for your trust and support.


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Find out about the first home owners’ grant at Barefoot Broker website

The Weekly Times’ Barefoot Broker Jason Khoury has advised young couples to take advantage of a government initiative to help them find a home. 

“The First Home Owners Grant is a national scheme funded by the states and territories and administered under their own legislation,” he said.

“The grant is a one off tax free payment to first home buyers in Australia that satisfy the eligibility criteria.

“To be eligible, you must be at least 18, you or other applicants may not be a company or trust, at least one of the applicants must be a permanent Australian resident, and you must occupy the residence for 6 months beginning in the first 12 months of settlement.”

The grants were established to assist eligible first home owners to purchase a new home or build their home by offering a grant.

The grant amount is determined by the date of the eligible transaction.

“This is the date of the contract to purchase a new home or contract to build a home,” the State Government advises.

“For an owner builder, the eligible date is when the building work commences.”

From July 1, 2017, the First Home Owner Grant Cap for new home purchases is $600,000.

To find out more visit the Barefoot Broker’s website link at: http://ichoice.com.au/home-loans/first-homeowner-grant

Pros and cons of buying property through a Self Managed Super Fund

TOO many people set up a SMSF to buy a property, who shouldn’t really be doing so, says TWT’s ‘Barefoot Broker’ and finance guru Jason Khoury. But at the same time, there are many it really suits who just haven’t got their head around the simple fact that buying in SMSF ticks both the ‘tax minimisation’ and ‘asset protection’ boxes.

When your capacity to service loans is assessed, for lending outside Super, the bank takes into account at all your commitments and will NOT account for the income you’re forced to put in Super (your ‘SG’ or Superannuation Guarantee).

However, when it comes to SMSF’s the banks can consider only your regular contributions into Super and the rental income the acquired asset will generate.

I helped a dentist buy her surgery building last week and it actually wouldn’t have worked outside super, given her numerous other loans.

Anyway, she’s much better off using the mighty SMSF tax haven great loan too, 4.58% fixed for 3 years with no Establishment Fee. The variance amongst the banks’ rates in this space is crazy.

Us financial advisors can’t give anything other than general advice. Plus I have chosen to specialise only in lending, so I’d get sued harder LOL.

But what I can tell you is why only months ago, I actually purchased our new office building in my SMSF! if you’re interested

The purchase price was $1.52m. I snapped it up two weeks prior to the auction, just loved it, it used to be the CBA building on the Hume Highway in Strathfield when I was a kid, and more recently a Curves gym.

The cheapest rate was offered by a bank who’d only lend 65% though.

But I didn’t have enough in Super for the rest.

That’s why I had extended the settlement period to July 7, enough time for Tina and myself to each concessionally contribute $35k in each before June 30, and then again on July 2.

The rest came from an investment offset of mine, and was non-concessionally contributed (we got no tax break for that bit).

By the way, at the moment (watch this space though), Bankwest allow you to unlock the equity against your home at the same owner-occupied rate (the increase must be restricted to a dollar amount representing 50% of your home’s value). The other banks charge the higher investment rate for the cash out bit. It’s daylight second if you want to avoid cross-collateralising and want part of your future investment loan at owner-occupied rates.

The interior fit out is underway, being paid by the tenant (my business). The rent iChoice pays my SMSF is of course a tax deduction. However, my SMSF only pays 15% tax on it, rather than something like 45% if we had bought in our personal names. How much that effectively save us is quite a big number. Rent of $90,000 x (45% – 15%) = $27,000 annual saving.

We need to understand that Super’s simply a different tax environment, proudly offered by our Government to encourage us to not rely on the pension. The above shows how powerful it can be. Once I hang my boots up (the loan will be repaid in 15 years) the tax rate in Super changes to 0%. And Capital Gains Tax is better too. But let’s look at the negatives of my decision to buy it in Super:

The equity I build up in the property will be unusable (I can’t leverage against this property) as loans in Super can only be taken to acquire

The building actually has the scope for another level to be built on top, but this is not allowed when the property is geared (to build it I’d need to not only get the $900K in to pay off the loan, but also the cost to build!)

The paperwork! If you have an SMSF you’d know all about it! But I don’t mind being a little inconvenienced if it gives me an extra half a mill, I’ll always switch & move my lending around to get ahead, we all should.

If you’re thinking of setting up an SMSF maybe do it in July (don’t do it in June and pay for a tax return for nothing) and also get the Custodian Trust set up to, as it needs to be established before you exchange. An accountant or Financial Advisor can assist you, please get a good one, not the nearest one. In life you need an accountant, solicitor, financial advisor and credit advisor / mortgage broker who are at the top of their game. Lucky the later comes at no cost!

By the way, name your corporate trustee of your SMSF something cool.

I called mine Khoury Boys Pty Ltd, and also set up khouryboys.com.au in case my little fellas ever open a pizza shop one day.