I am not sure if I have this "idea" of mine correct so thought I would drop a thread in here and see if anyone could tell me if it was incorrect. Obviously, I am aware of the strict financial advice rules and limitations and I am definately NOT seeking financial advice. I would just like to know if I have interprited things correctly and thought I would ask here to arm myself with more knowledge BEFORE approaching an accountant or financial advisor.
I am 32 years old, and so is my wife. We were recently blessed with the arrival of a baby boy (he's 2 weeks old). I am an electrician/instrumentation technician and my wife is doing her masters in pharmacy. I was earning a significanly high wage for a short period of time but when the wife (at that stage girlfriend) and I became pregnant I halved by wages and came back to Perth.
I am paying off a house we live in (subdivision is on the cards) and own one investment property
So I read this article - http://www.perthnow.com.au/business/...-1226588598905 and it got me thinking. I've been reading a bit on SMSF's and and trying to arm myself with knowledge so I can perhaps oneday be the master of my own destiny.
The article refers to the rules about purchasing property in a super fund and what you can/cant do etc.
Applying it to our circumstances I formulated what sounds to me to be a good plan. Once I have confidence in my ability to return the same, if not more than a normal super fund I could set up a SMSF. Hopefully at this stage my wife has finished her masters and our little boy (perhaps another) are old enough to go to school.
For the next 5 years or so my wife gains the hands on experience required to run a phamacy. I continue working as per nomal and inject into our super as much as I can. By this stage I suspect we would be around 40.
The article states a SMSF is able to borrow money now to invest which includes marginal loans as well as property loans. At this stage I would hope to have enough funds in the SMSF to maintain a significant share portfolio as well as contribute towards buying a business address. Now according to the article, the rules are strict when it comes to the use of property owned by a SMSF. It states that at no stage is anyone associated with the SMSF able to stay in the property. You can't purchase a house and land package in Cairns to use as a holiday home free of charge. BUT! if you own a business, you are able to run the business out of the premisis provided that the rent you are paying is the going rate. You cant discount yourself.
So my idea was perhaps to buy a place with the SMSF and rent it out to my wife and I so she can run a pharmacy.
My understanding may be incorrect (and this is why I thought I would post here and see if anyone could tell me if I am wrong) but this would provide the following advantages:
1) Rent paid would not go to a 3rd party, rather it would be returned into the SMSF. Although your not allowed to discount yourself or occupy it rent free you pretty much are because its going back into your super anyway.
2) As well as retaining the rent, the rent would also be written against profiets because its a running costs of the business which is a seperate entity from the SMSF
3) Rental income going into the SMSF would be taxed at 15%
4) If the property is held by the SMSF for more than 12 months the capital gains are discounted by one third. Meaning you only have 2/3 of your capital gains to pay tax on
5) That remainding 2/3 you only pay 15% on.
Am I being too optimistic here?
Have I miss interprited the article?
Obviously, I would seek the advice of a good accountant or financial advisor before jumping in and trying to set up a SMSF but I thought if I asked here in the beginners forum someone might have a similar experience that could relate to it.
Thanks for reading!