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Can I roll property into my SMSF?

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I want to start a self-managed super fund because my fund has not been performing well for years and I am paying more than one per cent to see them get pathetic returns. I have about $500,000 in my fund and I am 52, planning to work until 60 if my fund looks good.

Is this a sound idea? I am toying with the idea of rolling my investment property worth about $400,000 into my fund. If I am not allowed or it isn’t a good idea, should I sell it and then put the money into the fund? What are my annual limits for doing this?

On starting a self-managed super fund, or SMSF, you do have a good sum of money and so it would be economical to do so. You could spend around $2,000 a year to do the work for a SMSF and on a balance of $500,000, your cost would be 0.4 per cent.

Of course, you have to monitor your fund but you can get an administrator to help do a lot of the work including the tax return and as your balance grows, your costs will fall.

That said, I would like to think you’re pretty organised and interested in markets, funds and making money. You have to become your own fund manager if you want to replace your old one and so being committed to being professional is a good idea.

On your investment property, you can’t roll it in and so you either keep it and face a capital gains tax bill one day if you sell it or you sell it now, cop the capital gains tax, put the money into the fund, tax free, and then buy an investment property inside the fund. I think you have to look at the costs and the benefits of doing this.

I don’t like 80 per cent of your fund being in property, so you could borrow a bit to make sure you can hold some cash and some shares to give you a more diversified portfolio of assets in your fund.

By the way, the maximum amount you could put into your fund in one year is $150,000 each year or $450,000 in one go to cover three years, which stops you from further untaxed contributions for three years. I should add that a property inside a super fund would be capital gains tax free if it was sold when you are retired or 65 years or over.

This rule should be considered in your cost benefit analysis and given your money and the big ideas you have, finding a trustworthy adviser could be a great piece of advice!

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Friday, October 07, 2011

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