By Graeme Salt
Self-managed super funds (SMSF) may become the surprise winner in the budget, with investors emerging with relatively superior tax treatment.
In the budget, Trusts will be subject to a 30 per cent tax rate.
However, the Albanese government has left intact the ability of SMSF (itself a Trust) s to borrow – and at a more favourable tax rate.
And this is a double-bonus for SMSF investors as, under new capital gains tax rules because if you sell an asset outside super, it could now be taxed close to your marginal tax rate. But if you have it within super, the existing 33 per cent capital gains discount available after one year stays in place, creating an effective tax rate of 10 per cent.
At present, you pay CGT at your marginal tax rate, which could be 47 per cent if you are on the top rate. However, if you hold the asset for more than 12 months, you are entitled to a 50 per cent discount. This treatment will now be replaced by a system that indexes CGT annually to account for inflation. It is expected to sharply raise the effective CGT tax rate.
Until recently, lending to SMSFs was limited – with most banks having withdrawn from lending to them. However, in the past few months, lenders such as AMP and St George looking to open their doors to lending to Super.
And the SMSF sector has recently had a revival in commencements as more investors moved to directly control their savings. The total number of SMSFs has grown by around 7 per cent over the past year.
However, borrowing in Super is far from straight forward. Generally, SMSF Trustees are advised to have a minimum asset balance in the fund and its important to know things like what a Bare Trust is.
If you want to discuss more how to borrow in Super, please get in contact with me.
Graeme Salt is an award-winning mortgage broker. For a no-obligations consultation on your lending needs, please contact him on 02 9922 5055
