It’s in our nature to look out for our loved ones and one of the most valuable assets you will ever ‘own’ is your education.

So it’s not surprising that we receive a number of calls from people wishing to somehow pay for the future expenses of their child or grandchild’s education, in the event of their passing.

Unlike cash, cars or material ‘things’, the gift of education is one that could make a profound difference in your grandchild’s life.

So how can you ensure they’ll have their costs covered – rain, hail or shine?

The answer is rather simple – you set up an education fund for your grandchildren in your Will, through the vehicle of a Testamentary Trust.

Testamentary Trusts created by a Will not only facilitate the provision of your grandchildren’s education fund; they also offer significant tax savings on your inheritance. A win all round!

What is Testamentary Trust?

A Testamentary Trust is a Trust established by a Will. It only comes into effect after the death of the Will-maker.

Can I ensure that the funds can only be used for education or the benefit of my grandkids?

Yes – You tell us how you would like the funds in the education fund paid and we can accommodate this when drafting your Will.

What are the benefits?

There are lots of benefits having a Testamentary Trust Will:

  • Significant tax benefits and savings – at time tens of thousands of dollars can be saved!
  • Flexibility for beneficiaries – each grandchild is different!
  • Asset protection – Protect your inheritance from unwanted beneficiaries or claims.

It is complicated?

We will assist you to understand and draft your Testamentary Trust Will. That is what we are here for! Many of our clients who complete their Testamentary Trust Will are surprised by the simplicity of the process and delighted with the resulting peace-of-mind.

How do I start?

Contact our Estate Planning solicitors, who will be more than happy to clarify your situation and the next steps.

Australians are known to love property as an investment vehicle. Generally this has been achieved by borrowing from a bank to purchase property before paying it off over time. Since 2007 self managed superannuation funds (SMSF) have been allowed to borrow money to acquire property, which has seen a large increase in the amount of SMSFs and the amount of property owned by SMSFs.

What is a SMSF?

A SMSF is a superannuation fund that has four (4) or fewer members and is an alternative to retail and employer sponsored superannuation funds. In a SMSF, the members (who are subject to strict rules) have control over the superannuation fund, its investments and decisions.

What are the benefits of an SMSF?

  • Investment control and opportunities – members have flexibility and control over the SMSF’s investments
  • Favorable tax concessions – a SMSF is one of the most tax-effective ways to hold investments.
  • Estate Planning opportunities – Upon death a member’s superannuation benefit is not covered by their Will and a correctly structured SMSF Trust Deed can allow the member’s superannuation to be paid to the right person in a tax effective manner.
  • Borrowing opportunities – laws allowing SMSF’s to borrow provide an avenue for members to acquire property and/or other types of property (for example shares) in their SMSF.
  • Unlock cash in business premises – a SMSF can purchase commercial property that a member may own personally which in turn unlocks cash that can then be personally re-invested.

Tell me more about unlocking cash in my business premises.

If your SMSF buys the property from you using money contributed to the SMSF, then you can use the cash received from the sale for your personal circumstances now! The property moves into your SMSF and the money moves out. Cash in the SMSF is unlocked!

Are stamp duty concessions available?

Yes, commercial property in your own name which is transferred to your SMSF may receive substantial stamp duty concessions. This strategy could save you thousands of dollars in stamp duty!

Can I buy residential property in a SMSF?

Yes, but strict rules apply and failing to comply with the strict rules can have serious consequences.

There may be capital gains tax concessions too?

Yes, tax concessions may apply depending on when the property is sold and for how much. Obtain proper advice before you act.

How does borrowing in a SMSF work?

The loan must be a limited recourse borrowing arrangement, which simply means that in the event of default under the loan the lender only has recourse to the property, not other assets of the SMSF.

How to avoid problems when buying property in a SMSF?

Seek appropriate advice from qualified professionals. Consult with Southern Waters Legal and an accountant or financial planner who are familiar with SMSF borrowing.

Want to know more about borrowing in an SMSF or transferring property to your SMSF? Please contact Southern Waters Legal on (02) 9523 5535.

The end of the financial year is upon us and it is a good time to consider these 5 handy tax tips…

1. Superannuation

Do you have any employees whom you are paying superannuation? Superannuation is not tax deductible until it has been paid, accordingly you must pay before 1 July 2015 to be able to claim your superannuation tax expenses and be able to reduce your income tax bill.

2. Bad Debts

For businesses that account on an accruals basis, now is the time to go through your debtor list and consider writing the bad debts off. Bad Debts are tax deductible and can therefore be used to reduce your taxable income.

3. Expenses

Need a new desk? Laptop nearly had it? As a result of this year’s federal budget, small businesses can receive $20,000 as an immediate tax deduction for assets. This applies to businesses which turnover no more than $2million per year.

This does not mean that you will receive a cheque from the ATO for $20,000; it means that this amount reduces your income and therefore reduces the tax you will need to pay at the end of the tax year.

If there is a capital purchase you are considering to buy, this incentive is a great way to help your cash flow.

4. Salary sacrificing your Bonus into superannuation

If you are due for a bonus before the end of the year, consider salary sacrificing some or all of it into Super. Superannuation contributions are taxed at 15% compared to the top marginal tax rate of 45%.

5. Plan for next year

Make an effort to review your cash management processes and review your business or investment structure. Consideration should be given as to whether your existing structures provide asset protection and are tax-effective.

If you would like any assistance getting your affairs in order, please contact Simon Bennett, our experienced tax lawyer. We also know a few great accountants and financial planners that we could recommend. Get it touch today on (02) 9523 5535 or e-mail us.

1. Look after your future self

Superannuation is a way to save for your retirement. When you are a Contractor or Self-Employed, Superannuation is essentially your own obligation. There is no employer squirrelling away your 9.5% for you every pay run. Treat yourself as an employee and put Super away each year to ensure you can live comfortably in retirement.

2. Know the tax advantages

Income derived from your Super is taxed at 15%. Income you earn that is put into Super (up to certain contribution limits) is taxed at 15%. Putting money into Super can be very advantageous from a tax point of view. Further, if you own your own business there are very generous tax exemptions that may apply when you sell your business and put the proceeds towards Superannuation. Make sure you are aware of these when planning for the sale of your business.

3. Consider a Self-Managed Superannuation Fund (SMSF)

A SMSF is a Super fund where you get to choose how your retirement funds are invested. With most public funds usually invested in a mixture of shares (domestic and international), cash and retail property trusts, it is often the case that you may not have any idea where your retirement savings (Super) are invested. If you create a Self-Managed Super Fund you can decide where you would like your retirement savings to be invested, including purchasing properties that you choose and that will provide your SMSF with rental income.

4. Consider property as an investment

SMSFs can purchase property. A SMSF can hold residential or commercial property. It’s important to note that you can’t buy a residential property to live in, or for any family member to live in.

A great strategy is for an SMSF to buy a commercial property to lease back through their business. The benefit of this is that you are essentially paying rent to your future self.

You are able (subject to very specific requirements) to borrow money to purchase a property through your SMSF. There are also stamp duty concessions for transfers of commercial property you currently own into your SMSF.

5. Know your limits

For the financial year 2014/2015 – the maximum Concessional contribution (essentially pre tax) is $30,000 and if you are aged 49 or over on 30 June, or if you are aged 59 or over on 30 June 2013, the maximum contribution is $35,000.   The maximum non-concessional contribution (essentially post tax) is $180,000, but you have the ability to contribute 3 years in one go, if you would like.

Don’t leave it until the last minute of a financial year to make contributions. Allow sufficient time for payments to be processed by your fund.

6. Integrate your Superannuation into your business planning

Business planning should be an integral part of your business. By understanding both your private and business goals, you can then develop an action plan, which focuses on achieving these goals. It will also help minimise any risks you may have with your business and the undue stress related to such risks later on.

By thinking about your Superannuation and integrating it within your business planning, you will ensure that you have some form of asset/income once you retire.

If you would like any advice on setting up a SMSF or planning for your future, call Simon Bennett on (02) 9523 5535.