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Acquiring property through an SMSF

Posted on April 4, 2016 by admin

Members of a self-managed superannuation fund (SMSF) looking to acquire property through the fund need to be aware of the risks involved in the strategy or risk substantial penalties.

One of the considerations investors should be making if they are deciding to put a property in their SMSF is whether the strategy will improve retirement outcomes. Ultimately, investment decisions, such as the aforementioned strategy, will have ramifications for whether members have a comfortable retirement or need to rely on government support.

SMSF members should also consider the liquidity of the current assets in the fund. As property is a large, illiquid asset the fund should have enough cash on hand to pay day-to-day expenses. If the property is the only asset in the SMSF and it is in pension phase, it may not be able to supply a sufficient retirement income to its members.

Members purchasing property through debt have several restrictions on their investment under the limited recourse borrowing arrangement (LBRA). To establish an LBRA, a 20 per cent deposit is required and enough money to cover stamp duty and legal expenses within the SMSF, or ready to roll over from another super fund.

The fund will be assessed on its borrowing potential based on members’ superannuation contributions and the rental income from the property. Lenders will often require a personal guarantee from the SMSF trustees as the lender can repossess the property if an SMSF cannot meet its repayments.

In addition, if property is purchased using debt any improvements made to the property cannot change the nature of the property. Improvements must be paid for by cash in the fund rather than using further borrowings to pay for expenses.

Investors need to ensure they meet the obligations of the fund, such as having sufficient cash held in the fund. If the member isn’t receiving contributions, or the property is vacant for a period, then the fund will risk becoming a non-complying fund and may face severe penalties.

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Government increases cash flow support for businesses

Posted on March 27, 2020 by admin

The Australian Government has increased support for businesses to manage cash flow challenges under the ongoing COVID-19 circumstances.

The Boosting Cash Flow for Employers measure announced on 12 March 2020 will be increased to provide up to $100,000 for eligible small and medium-sized businesses. To be eligible employers must have been established prior to 12 March 2020 and have an aggregated annual turnover of less than $50 million and employ workers.

The measure will provide employers with a payment equal to 100% of the tax withheld from wages and salaries. This is a rise from the original 50%, with maximum payments being increased from $25,000 to $50,000 and minimum payments being increased from $2,000 to $10,000.

Employers will receive payments from 28 April 2020 from the ATO as automatic credit in the activity statement system upon lodging eligible upcoming activity statements.

Eligible businesses will be provided with an additional payment during July – October 2020. The payment will be equal to the total amount received under the Boosting Cash Flow for Businesses scheme. For monthly and quarterly activity statement lodgers, these payments will be provided as automatic credit in the activity statement system for each lodgement up until October 2020.

The Government has also introduced the Coronavirus SME Guarantee Scheme to support the flow of credit for small and medium enterprises (SME) by providing a guarantee of 50% to participating SME lenders for new unsecured loans that will be used for working capital. To be eligible, SMEs will have a turnover of up to $50 million and the loans must comply with the following terms:

The SME Guarantee Scheme will still require businesses to repay these loans and approval is subject to regular lending requirements. The Scheme will commence by early April 2020 and be available until 30 September 2020.

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