I have $350,000 in super and thinking of using to fund a property development in Brisbane where I can buy the property, move the existing Queenslander to own side and create space for two townhouses. The sale price is around $800,000 and I will need about $500,000 to build. I’m 53, not married, no kids and earn $180k a year. Own my own home and have an unencumbered investment property valued at $600,000. The idea would be to sell the property in Brisbane is 5 years to help fund retirement. Is this a good idea ?
I'm not an expert on this type of thing, but my understanding is that it can't be done.
Using the limited recourse borrowing arrangements inside super doesn't allow you to make changes to the 'single acquirable asset' so you won't be able to borrow to do it.
You could possibly do the project in an ungeared unit trust and invest the SMSF monies, together with your own monies.
It's a minefield and possibly difficult, expensive and risky.
If you really wanted to do it, I'd probably look to do it outside of super all together.
But is this project really something you want to do? Is it going to provide a return to compensate for the risk? Do you need to do it?
As Glenn has already said, you can’t do what you are trying to do within an SMSF when borrowed money is involved.
Even the plain vanilla strategy of buying a property in your SMSF is proving difficult as the major banks have stopped lending to SMSF’s.
Tread very, very carefully if this is something you pursue.
All the best.
Hi all. Here is my opinion.
the ATO has a burr under it's saddle about LRBA and eventually I expect it will get legislated out of super altogether
In the meantime you can expect ALL of the expenses associated with running a SMSF to double.....accounting, audit, ASIC, not to mention the pineappling you're gonna get in setup fees and legals to get the bare trust up and running
Get some FIRM quotes on running your SMSF AND BARE TRUST. Do some hard calculations on potential growth in property prices in brisvegas. (Hint: I bet it's WAYYYYY less than your planner is working on). Do best, average and worst case scenario.......
Then factor in the pain and suffering associated with the almost inevitable ATO audit......it's significant
Tgen compare all of that with what you will achieve by leaving your super right where it is.....and look at a long term plan to fund your retirement that doesn't make so many people rich at your expense......