Sally was 50 when she joined Harry as partner in a small law firm. She was looking at purchasing an investment property for $500,000 as an investment which would require a loan of $400,000. After re-entering professional life only a few years ago, Sally is now on the top marginal tax rate, so her immediate need was to consider sensible ways to accelerate her retirement nest egg.
After weighing up alternative strategies such as a “normal” negatively-geared investment in her own name, we recommended that Sally set up a Self-Managed Super Fund (SMSF) to purchase the property via a limited recourse borrowing arrangement. We assumed her rent would be $500 per week increasing 2% pa and the value of the property increasing by 5% pa, whilst her loan interest was 8% for the duration (15 years) and paid via the rental income and SGC contributions.
By utilising a SMSF, and assuming current laws remain the same, the total projected advantage to Sally upon selling the Property when she retires at age 65 and starts a pension, would amount to about $150,000.
Sally can look forward to retirement at 65 knowing that she can continue enjoying her lifestyle while she maximizes her retirement savings. We continue to help Sally plan for her retirement.
This is a hypothetical example based on a real client experience. Names and details have been changed.