Case Study: Purchasing Your Dream Home

Posted on July 23, 2015 by ATB Chartered Accountants

John approached ATB Chartered Accountants in 2008 with the intention of purchasing his “dream home”, a beach house in Freshwater in the Northern Beaches of Sydney, to live in upon his retirement. His main issue was that he would have to take out a bank loan for the purchase, or wait until he generated enough of his own funds. John had a large amount of money invested in super which he had not considered using to purchase this property.

CONSIDERATIONS

The client’s personal goals were considered when advice was provided. With John’s aim of living in the beach house upon his retirement, it became clear that the property needed to be purchased, as it would be highly unlikely to still be on the market when he reached 60. While seeking advice for John, we found that there was enough money in his super fund to buy the property. Purchasing this through an SMSF would allow him to gain access to the property following his retirement.

SOLUTION

At ATB Chartered Accountants, we explained to John that purchasing the property through his SMSF would lead to a large number of financial advantages, there would be no need to take out a loan, and the property could be rented out, earning income directly into the SMSF. As well as this, the rent earned by the SMSF would only be taxed at a rate of 15% rather than 47% if he were to earn the rent individually. He would be able to acquire the beach house through a lump sum withdrawal upon retirement with no CGT or stamp duty (NSW) payable.

This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.