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- DIY Super Fund is established for you and your family members.
- You roll over all your and other family members (maximum 4) current Super Funds in your own DIY Super Fund.
- If you do not have enough cash in your DIY Super Fund to purchase property outright, you can borrow on your own property or other investment properties to fund the purchase.
- You search a property that would suit your DIY Super Fund's investment strategy. Measure Equity in your own home and other investment properties for borrowings for this new purchase.
- Investment Property is purchased in Trustee's name (your name - if you are a trustee of your DIY Super Fund) for your DIY Super Fund and in your name as Tenants in Common.
- Investment property cannot be used as a collateral. Your DIY Super Fund is not permitted to borrow and none of its assets can have a lien over them, Investment Property has to be purchased with cash / outright.
- Investment in property will reward Super Fund with a modest rate of Return and capital growth for future retirement benefits.
- Depending on percentage share in investment property, rental return and interest rate, borrowing can result in Negative / Zero / Positive Gearing for members of DIY Super Fund.
- This (lower risk) strategy helps you to unlock your super fund and use equity in your home for future capital growth, without affecting your lifestyle (negative cash flow due to negative gearing) due to low borrowing. We call this strategy "Super Gearing".
Assuming $400,000 Property is purchased, with half Super Fund and half borrowing on own home ...
| Rental Income (Assume $350 Per Week) | 18,200 |
| Cash Expenses (rates, agents fees etc assumption) | 2,500 |
| Depreciation** | 7,500 |
| Total Expenses | 10,000 |
| Taxable Income before Income Tax | 8,200 |
|
Super Fund |
Amount |
Individuals |
Amount |
Total |
|
½ Share of Profit |
4,100 |
½ Share of Profit |
4,100 |
8,200 |
|
Admin / Audit Fees |
1,000 |
Interest Expense (6%) |
12,000 |
13,000 |
|
Profit |
3,100 |
Loss |
(7,900) |
(4,800) |
|
Tax on Profit (15%) |
(465) |
Tax Refund (48.5%) |
3831.50 |
3,366.50 |
|
Cash Received (9100 - 1250 - 1000 - 465) |
6,385 |
Cash Received (9100 - 1250 - 12,000 + 3831.50) |
(318.50) |
6066.50 |
- Super Gearing" results in Investment Property with cash cost of only $318.50.
- Asset grows in value for future Retirement Benefits
- Minimal cash flow pressure for Interest payments on loan. As the loan taken to purchase $400,000 Investment property is only $200,000. You can become a landlord without much effort.
- Your DIY Super Fund owns property "Tenants in common", hence all the income and expenses are shared as per percentage of ownership.
- Over a period of time, rent may go up and depreciation expense may come down.
- With new employer contributions & rental income, your DIY Super Fund will grow over the years. More Investment properties can be purchased as fund balance accumulates.