Up until recently, borrowing to invest using your superannuation money was prohibited.  But new legislation means that Self Managed Super Funds (SMSFs) are now allowed to borrow to invest in direct property or shares – as long as an instalment warrant is used for the transaction.

What are the advantages of borrowing to invest in your SMSF?

·         Your SMSF has more money invested than if it hadn’t borrowed – and therefore your SMSF could potentially benefit from higher investment income and capital growth

·         Investment income is taxed at up to 15% (compared to up to 46.5% outside of superannuation)

·         Capital gains tax is up to 15% (compared to up to 46.5% outside of superannuation)

·         With good planning, investment income and capital gains tax can be eliminated, via the use of transitioning your superannuation to the pension phase.

·         The asset is fully protected from future litigation & bankruptcy you or your business may face (as long as it was not placed in your SMSF for protection against a specific litigation or bankruptcy you were aware of)

What is an instalment warrant?

An instalment warrant is a financial instrument which enables an SMSF to purchase a property or shares partly with borrowed money. 

Typically the SMSF will contribute a sum of money to the purchase (called the ‘first instalment’) and arrange for a lender to contribute the balance (which is equal to the ‘second instalment’). The lender could be a financial institution or a member of your SMSF.

The SMSF now has a beneficial interest in that property or shares, and as a result will receive all rent paid by the tenants or dividends generated by the shares. Tax at the concessional rate of up to 15% is payable on this income by the fund.

In addition, your SMSF pays interest on the loan and fees to the lender.  In the case of a property it also pays for repairs, maintenance and property management expenses. These are deductible to the fund.

At the end of the term, the purchaser can choose whether or not to pay back the second instalment.

What are the options at the end of the term?

An instalment warrant over an asset will usually have a defined maturity date (typically 1 – 20 years).  At the end of the term, the SMSF can:

·         pay the second instalment and acquire full ownership of the asset, or

·         sell the instalment warrant on a secondary market, or

·         roll over the warrant for another term, or

·         do nothing, in which case the asset will be sold and the proceeds applied to the outstanding loan and other associated costs, with any leftover going to the SMSF.

Who should use instalment warrants?

Instalment warrants will suit those members of SMSFs who meet one or both of these criteria:

·         Need to build their retirement savings faster

·         Want to hold a key property inside the low tax super environment (e.g. their business premises).

For more information contact Nicole Pertzel on ph: (03) 8682 6319 or register for a Free Self Managed Super Seminar in South Melbourne  6pm – 8pm Wednesday, 22^nd April 2009 via phone as above or via email: npertzel@australianunity.com.au

^Nicole Pertzel is an Authorised Representative of Australian Unity Financial Planning Limited (AUFP) ABN 26 098 725 145, AFSL 234459. This information has been prepared by AUFP. The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current laws and their interpretation. 

This information has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. Because of this you should, before acting on it, consider its appropriateness, having regard to your objectives, financial situation and needs

Gordon Ramsay has been one of the @#$%^ hottest things on television in the last twelve months

Apart from the ubiquitous swearing, part of his appeal is his ability to tell the truth about the situation his restaurateurs are facing and then how. if they listen, they can build a fabulous business.

So, what can we learn about professional selling and negotiating from the man who looks like he’s gone ten rounds with a garlic press!

1. Dear client - do you know you have a problem? Despite looming disaster, Gordon has to get the restaurateur (read dope who thinks prawns go with chocolate sauce) to accept they are in the brown sticky stuff. In our corporate world, how often do we know the client has a serious problem in maintaining market share or cutting costs or speed to market? How often do we hold back, suggest, allude or hint rather than say, hey Mr. Banking Person – your customer service is about as attractive as Kevin Rudd in a latex body suit. Let’s get in front of the decision makers and tell them the truth.

2. We can solve your problem. Gordon says’ change the @#$% menu, keep it simple, rejig the decor and deliver quality produce at the right price and they’ll come in droves.

How often do we overcomplicate the sales process with jargon, synergistic strategies and customer engagement models (I went out with one once, but she dumped me for a spin doctor!)

Let’s just change the client’s menu and show them how it solves the problem – SIMPLY!

3. New opportunities. Our civil tongue challenged friend then proceeds to discuss ‘What if’

What if we turn this rubbish heap into a Steak House?
What if we change our clientele for a younger, richer crowd?
What if we cook desserts at the table with more flare than a 1970’s trouser?

In sales, pro-active discussions with clients are often rare because many sales people say’ the client’s too risk averse or we haven’t built one of those yet’ Bollocks!

Let’s show the client all the wonderful opportunities for them if they bought your solution differently, or engaged in a longer term contract or used all of your services not just a few

There’s a bit of Gordon #$% Ramsay in all of us. Let’s do it.


Written by Elliot Epstein, CEO, Salient Communication

Elliot has trained and coached over 3000 people throughout the Asia Pacific Region and is a sought after keynote speaker on Sales, Negotiation, Leadership and Presentations

E: elliote@salientcommunication.com.au

© Salient Communication 2008