5th April 2016
Why Have Multiple Self-Managed Superannuation Funds?
This blog deals specifically with a scenario where you have an SMSF and your investment strategy is to invest in property.
If this is the case and you are in a position to hold more than one property via superannuation there are multiple reasons for holding those investments through separate SMSF’s such as the ability to allocate certain assets for estate planning purposes, to separate risks between different assets and also (the focus of this blog) to minimise your Land Tax obligations.
We will focus on the NSW jurisdiction, where the Land Tax threshold currently sits at $482,000. For every dollar in land holdings above the threshold (note – an individuals main residence is completely exempt) an entity pays 1.6% plus $100 per annum and then 2% for every dollar above $2,947,000 in land holdings.
Individuals, some companies, certain trusts and SMSF’s are entitled to the full land tax threshold. Unlike individuals, related companies and certain trusts where aggregation rules apply, SMSF’s are treated as separate entities and as such, each SMSF of which an individual is a member is entitled to its own land tax threshold of $482,000.
So, assuming there was an SMSF that held one property with land value of $482,000 and it purchased a second property with land value of $482,000, on current rates & thresholds, it would pay $78,120 in Land Tax over a 10 year period. Assuming it costs $3,000 per annum to administer a second SMSF that would return a net saving of $48,120 (plus earnings on savings) over the same 10 year period if that same property had been purchased through a second SMSF.
This article is general in nature and should not be relied upon in making an investment decision. We strongly recommend you seek financial advice prior to making any investment decisions.