Hpw Client Strategies
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![Page 1: Hpw Client Strategies](https://reader034.fdocuments.in/reader034/viewer/2022042715/558368efd8b42a6d488b4a45/html5/thumbnails/1.jpg)
Hewison Private Wealth Client Strategies
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BORROWING IN SUPER
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Case Study
• Jim (45) owns his home with no mortgage
• SMSF - $800,000
• Property for sale - $1,000,000
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Key Differences
• Limited Recourse Loan
• Single Acquirable Asset
• Can only improve asset under limited circumstances
• Cannot make use of the asset
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Jim
Property
Bank
Loan
$50
0kPa
y $1
m
Inte
rest
Rent
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SMSFJim
Bare Trust Property
Bank
Loan
$50
0kTr
ansf
er $
1m
Pay $1m
Inte
rest
Rent
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Jim Bank
SMSF
Bare Trust
Loan
$50
0kTr
ansf
er $
1m
Pay $1m
Inte
rest
Property
Loan $500k
Interest
Rent
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Estimated tax saving from Borrow in SMSF strategy $8,463 per annum
Traditional Borrow in SMSF
Jim
Salary $100,000 $100,000
Rental Income $70,000 $0
Loan Interest -$37,500 $0
Taxable Income $132,500 $100,000
Tax Payable $40,288 $26,950
Jim’s SMSF
Rental Income $70,000
Loan Interest
Taxable Income $32,500
Tax Payable $4,875
Total Tax $40,288 $31,825
-$37,500
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Capital Gains Tax Saving from Borrow in SMSF strategy $162,750
Traditional Borrow in SMSF
In 15 years time:
Property Value $1,700,000 $1,700,000
Purchase Price
Capital Gains $700,000 $700,000
Capitals Gains Tax $162,750 $0
$1,000,000 $1,000,000
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Case Study
• Jan is 70 and retired• SMSF of $2,000,000 & Cash of $1,000,000
• Option 1o Invest $1m in Jan’s personal name
• Option 2o Lend $1m to SF and invest within SMSF
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Pension Strategies
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Withdrawal & Re-Contribution Strategy
• Objective – Increase tax free component
Withdraw Re-contributeTaxable Tax Free
Component Component
SMSF
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Withdrawal & Re-Contribution Strategy – Case Study
BILL o 64 years of ageo Retiredo Has a SMSF with benefits of $1 million o 100% of Bill’s super benefits are made up of
the taxable component
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Withdrawal & Re-Contribution Strategy – Case Study
Withdraw Re-contribute$450,000 $450,000
SMSF
BILL
BILL
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Withdrawal & Re-Contribution Strategy – Case Study
Before Strategy
Taxable Component $1,000,000 100%
Tax Free Component $0 0%
Death Benefits Tax $165,000 16.5%
If Bill were to pass away prior to undertaking this strategy?
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Withdrawal & Re-Contribution Strategy – Case Study
After Strategy
Taxable Component $550,000 55%
Tax Free Component $450,000 45%
Death Benefits Tax $90,750 16.5%
Tax Saving $74,250
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Withdrawal & Re-Contribution Strategy – Case Study
BILL o What if 50% of Bill’s super benefits are made
up of the taxable component and 50% are tax free?
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Withdrawal & Re-Contribution Strategy – Case Study
After Strategy
Taxable Component $275,000 27.5%
Tax Free Component $725,000 72.5%
Death Benefits Tax $45,375 16.5%
Tax Saving $37,125
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Withdrawal & Re-contribution Strategy Considerations
• Super Contribution Limitso Maximum non-concessional contributions of
$450K
• Withdrawals are proportionate to components
• Possible abolition of in-specie contributions from 1 July 2012
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Separating Pension Interests
• What is it?o Create multiple pensionso Isolate tax free components in a separate pension
• Why?o Preserve tax free component
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Separating Pension InterestsCase Study
SMSF
Draw remainder$47,500
Pension Payment
$550,000100% Taxable
Existing Pension
Pension PaymentDraw $22,500
(min pension of 5%)
$450,000100% Tax free
New Pension
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Separating Pension InterestsCase Study
• Taxable Component in 10 years’ timeo Before Strategy $482,070o After Strategy $327,943
• Benefit = $25,430
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Pension Payment Breakdown
What is it?• Management of a couple of pension payments
Benefit?• Reduce tax liability
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Pension Payment BreakdownCase Study
Bob & Betty o Bob (62)o Betty (57)o SMSF value = $1 million ($500K each)o All benefits are taxable component o Income requirement, $150K per annum
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Pension Payment BreakdownCase Study
Before
Bob Betty
Account Based Pension $75,000 $75,000
Taxable income $0 $75,000
Income Tax $0 $17,550
Less: Pension Rebate (15%) $0 $11,250
Tax Payable $0 $6,300
Tax Payable
Before $6,300
After $0
Tax Saving $6,300
After
Bob Betty
$130,000 $20,000
$0 $20,000
$0 $2,400
$0 $3,000
$0 $0