Grow SMSF

We will be closed this Friday 30th of August for our local Gold Coast Show Day public holiday.

Direct from the mouth of the Treasurer:

"Accumulated funds held by a self-managed superannuation fund CAN BE USED TO finance capital improvements to assets acquired under a limited recourse borrowing arrangement, including energy efficiency improvements to rental properties. This is provided that the improvements do not fundamentally change the nature of the asset."

A private citizen submitted a petition to ask for laws to be changed to enable SMSFs to borrow to finance the installation of energy-efficient assets and improvements for SMSF-owned rental properties.

The government knocked it back, saying the SMSF can already pay for such improvements via its cash resources.

So can an SMSF make improvements to a property where there is an LRBA (SMSF loan) in place?

Yes, of course, it can - including significant renovations, provided the asset has no 'fundamental change'.

Why is a "bare trust" called a "bare trust"?

A "bare trust" is called a "bare trust" because it represents the simplest form of trust where the trustee(bare trustee company) holds property solely for the benefit of the beneficiary (SMSF), without any additional duties or powers beyond transferring the property as directed by the beneficiary (SMSF).

In a bare trust, the bare trustee has no discretion or active duties other than to hold the property and convey it to the beneficiary(SMSF) upon request.

The bare trustee acts merely as a nominee or a legal title holder, while the beneficiary(SMSF) has the right to both the trust's income and capital at any time.

This simplicity and lack of additional responsibilities or powers make the trust "bare" or "naked" in nature.

You can order a bare trust via the Grow SMSF website anytime 👍

Bare Trust Bare trust set up quickly and easily online. Also known as a holding trust. A bare trust deed enables an SMSF to borrow to buy property.

Just a quick message to let you know I am going to change the page name back to "Grow SMSF" and also update the profile picture.

I previously changed the name to "Kris Kitto - Grow SMSF" because I was commenting, posting and interacting in a couple of FB groups as the Page.

However, due to some a member of one page having a whinge to the group admin (about me interacting as a page, rather than in my personal capacity), it was requested I stop, even though the admin himself had no issues with it!

It's also appropriate because as the Grow SMSF team *grows* the business is less about me and more about my team and their skills/knowledge in supporting our customers.

Enjoy the rest of your weekend,
Kris 🌴

The VanEck Bitcoin ETF will list on the ASX on Thursday (20/07/2024) under the ticker VBTC, marking the first on the exchange that tracks the price of bitcoin, the most widely held and actively traded cryptocurrency.

There are two spot BTC ETFs already available on CBOE and available via most Australian brokers:

EBTC - ETFS 21SHARES BITCOIN ETF and also
IBTC - MONOCHROME BITCOIN ETF.

Please note the above is general information only and not a recommendation or endorsement of any financial product.

https://www.afr.com/markets/equity-markets/asx-greenlights-first-bitcoin-etf-in-landmark-listing-20240614-p5jlry

ASX greenlights its first bitcoin ETF in landmark listing VanEck’s bitcoin ETF is expected to list next week, marking the first direct exposure to the emerging asset class on Australia’s primary exchange.

ASIC Fee Increases

On the 1st of July each year, ASIC indexes its fees in line with inflation.

The cost to register a new company increases from $576 to $597, and annual review fees also increase from $310 to $321 for standard companies and $63 to $65 for special purpose SMSF trustee companies.

If you're thinking about setting up an new SMSF, now is the best time of the year to do it so it's ready to go for the new financial year!

ASIC Fee Increases 2024 Annual review fees for SMSF trustee companies increase from $63 to $65 and the cost of registering a new company increases to $597.

Brilliant and insightful piece by Peter Burgess, CEO of the SMSF Association on the rubbish being peddled by vested interests regarding SMSF borrowing via LRBAs crowing young buyers out of the housing market.

"SMSF investment in residential property, both directly and through LRBAs, stood at $76.9 billion. With CoreLogic valuing Australia’s residential market at $10.8 trillion, it means SMSFs hold about 0.7 per cent of the market.

I’m no economist, but I fail to see how such a low level of investment is crowding out first home buyers."

As we know, the anti-SMSF brigade never lets the truth get in the way of whatever narrative they're pushing.

As I've said before, if the politically driven dogma was dropped, they'd actually see that SMSFs have the capacity to increase housing supply, something Labor's industry super fund overlords are unwilling to do.

Sorry for getting political 🧐

LRBAs – fact or fiction - SMSF Association LRBAs are a systematic risk to the superannuation system and are crowding young buyers out the housing market.

# # Industry funds outflows to SMSFs double # #

There has been a doubling in outflows from industry funds to self-managed superannuation funds over the past two years, according to new analysis from WealthData.

As well, the WealthData analysis points to retail superannuation funds narrowing the long-standing performance gap with industry funds.

The analysis is based on the latest quarterly superannuation data provided by the Australian Prudential Regulation Authority (APRA) together with that from the Australian Bureau of Statistics and the Australian Taxation Office (ATO).

According to WealthData principal, Colin Williams, after a period of restricted transfers out to SMSFs from APRA-regulated funds, the latest data has pointed to a steady increase in transfers.

“The flow out to SMSFs has essentially doubled since Q1 2022, driven largely by increased losses at Industry funds,” he said.

The WealthData analysis also pointed to SMSFs continuing to hold market share, accounting for around 25% of total super assets, while industry funds retain market dominance with 34.9% albeit that retail funds have grown marginally from 20% to 20.3% market share.

Williams also pointed to industry funds beginning to feel the weight of outflows, with benefit payments in the form of pensions having more than doubled from $1.49 billion in the first quarter of 2020 to $3.07 billion in the March quarter.

He said that, by contrast, retail funds had experienced a more stable trend, increasing from $3.09 billion to $3.8 billion.

The WealthData analysis coincides with that contained in the Investment Trends 2024 Super Member Engagement Report which confirmed that member engagement remained highest for members with balances of over $250,000.

“Member engagement with their super fund continues to increase, as many more look to take matters into their own hands when it comes to retirement planning,” Ludovic Sevestre, Associate Research Director at Investment Trends said. “Our data also reveals that the more interactions non-retirees have had with their super fund over the past year, the more likely they are to start thinking about retirement.”

Source: https://financialnewswire.com.au/superannuation/industry-funds-outflows-to-smsfs-double/

The self-managed super fund sector is changing beyond recognition. Suddenly, SMSF operators are younger, commencing funds with a lot less in the bank and operating without using a financial adviser.

It’s a very different picture from the traditional profile of the flinty older investor who has millions squirrelled away in the nation’s best-known tax protection shelter.

The data emerged this week in a new report from the Investment Trends group, which was produced in conjunction with exchange-traded fund powerhouse Vanguard, which is making a big move into super.

The new face of self managed super funds – and they don’t want advice — The Australian They are younger, have less money and don’t have a financial advisor. Welcome to the new generation of investors attracted to self managed super funds.

We've had a lot of questions about how carry-forward concessional contributions work.

This article walks through the process of determining how much you can make in additional catch-up contributions and the tax deduction you may be able to claim (with examples).

General educational information only. Obtain your own personal financial and taxation advice before making a decision.

Carry-forward Concessional Contributions - Supercharge Your Super Catch-up concessional contributions. Claim tax deductions by contributing up to $27,500 plus unused caps from prior years before 30 June 2024

Great explanation of how catch-up concessional contributions work.

Worth a read 👇

How to claim a $157,000 tax deduction while turbocharging super Anybody who can make extra concessional contributions of this magnitude should seriously consider doing so.

LRBA ban key to Greens Div 296 vote

"Greens MP Max Chandler-Mather said the growing use of LRBAs within SMSFs introduced an unacceptable level of financial risk into the superannuation system and were exclusively used for property development purposes."

What a load of 💩

Total value of the Australian residential housing market: $10.4 TRILLION
Total value of residential property owned by SMSFs (Dec 23): $49 BILLION

SMSFs own less than 0.5% of all residential properties.

Also, in November 2022, the Council of Financial Regulators (CFR) reported that limited resource borrowing arrangements (LRBAs) pose no material risk to the superannuation or broader financial systems.

If politicians actually used their brains, they would see that SMSFs have the potential to unlock new housing supply and do the heavy lifting Labor's industry super fund mates are unwilling to do!

https://smsmagazine.com.au/news/2024/05/20/lrba-limit-key-to-greens-div-296-support/

So what actually is included as 'Business Real Property' when an SMSF acquires it from a related party?

What is NOT included?

Also, how does it work when there is an element of personal use?

Some interesting examples in this article.

https://www.smsfadviser.com/news/23470-look-at-all-assets-when-investing-in-business-real-property

We already know about the looming additional super tax on balances above $3m (Div 296).

Will comment if any other super/SMSF specific items are found in the Budget documents.

Who are the winners and losers in this year's budget? Treasurer Jim Chalmers has handed down the government's third budget. Have a look at what's new — and what's in it for you.

Worth a read 🧐

Why would anyone want to invest in Melbourne’s housing market? Some experts are predicting Melbourne’s housing market to bounce back strongly in the next two years, but others warn about getting in too early.

We're often asked whether the ATO knows when people crystalise profits and losses on crypto assets (personally or via an SMSF).

The answer is yes. Always yes!

Read more 👇

***FREE AFR ARTICLE - NO PAYWALL***

ATO targets crypto traders’ tax affairs, bank details The Tax Office is ramping up its surveillance of crypto traders, demanding that exchanges hand over details around clients’ ID, wallet addresses and bank accounts.

Please be aware the Grow office is closed today due to QLD Labour Day 🌴

Excellent article covering the ins-and-outs of buying property interstate.

Very relevant for SMSF investors 🏠

Why this Sydney investor bought property in Brisbane Investors from Sydney and Melbourne are increasingly looking further afield in the hunt for value. But how do you go about buying in an unfamiliar market?

Australians withdrew $730 million from the super system for medical procedures last financial year, up 88 per cent on 2019.

The ATO has to approve any early release on compassionate grounds, and it’s only allowable where the person is experiencing acute or chronic pain, mental illness or a life-threatening injury or sickness.

If it’s genuine, no problem.

But there are vultures out there looking for any opportunity to rort the system all while collecting fat fees to ‘help’.

It’s only going to get worse as people get squeezed by unaffordable health care and insurance and increasing medical costs.

Start-ups, dentists drain retirement savings in ‘super scam’ The value of super withdrawn for dental treatments nationally jumped 373 per cent to $313 million from 2019 to 2023, and Labor has warned of a potential crackdown.

Agree with the commentary from Saxo in this article.

The following is clear:
- The current Labor government (and I am sure succeeding governments) can't keep their hands off the trillions of dollars or OUR MONEY sitting in superannuation;
- Most new SMSFs are being set up by people in their 30s and 40s; our generation has larger average balances and a higher level of financial literacy than previous generations;
- There is more of a global focus on investment opportunities;
- Setting up and running an SMSF has never been easier;
- Control continues to be the strongest driver to set up an SMSF.

Have a read 👇

SMSFs will continue to grow as government eyes superannuation coffers, says CEO The number of people using SMSFs will certainly grow over the next two decades as the government continues to view superannuation as an infrastructure bank said the head of an international investment

1.3m Australians may be paying tax they don’t have to

More in comments 👇👇👇

1.3m Australians may be paying tax they don’t have to Superannuation accounts worth $225 billion have not been switched to their pension phase despite their owners reaching age 65 and becoming eligible for tax-free benefits.

https://smsmagazine.com.au/news/2023/08/17/crypto-wallet-may-cause-audit-failure/

The most likely outcome is that the auditor would note a 'Part A Qualification' in their audit report.

This is NOT a failure and not a compliance issue by itself nor does it mean the ATO will be breathing down the trustee's neck either.

SMSF trustees have an overarching obligation to act in the best financial interests of themselves as members. This means applying best practices when it comes to securing SMSF assets - especially when those assets are part of a new and highly risky asset class.

Crypto wallet may cause SMSF audit failure | SMS Magazine SMSF members holding cryptocurrency in offline wallets may find themselves unable to prove either the ownership or existence of the asset to a level that satisfies an auditor.