1. Kovacs Property GroupWealth through Property Education and Trusted ImplementationThe New Super Story. puts you in control

2. The New Super Story. puts you in controlEducational Information Only NOT financial advice The information is indicative only and meant to be used as a guide to thebenefits of the strategy. This information should NOT be construed as arecommendation to acquire any particular financial product. The information does not take account of any persons personalcircumstances and is by no means a suggestion that the factual andgeneric information and calculations would be applicable to any personspersonal circumstances, the information may be portrayed entirely differentlyafter your advisor analyses your personal circumstances. These examples are pre - tax and do NOT include any TAX liabilities inany way. Your TAX situation may have a major impact on the outcome. 3. The New Super Story. puts you in controlWe think the changes made on the 24th ofSeptember 2007 make Superannuation the bestall-round environment to buy & hold residential investment property. It allows 3 fundamentals of wealth creation to exist in aprotected environment:- The principle of making your money work harder for you(contributions, borrowings, compound growth & diversification) The business principle of making money and keeping it All(tax structure / in-built protection /no capital gains tax / savings) Understanding Money grows exponentially if you give it time(Time is your friend) 4. The New Super Story. puts you in controlNew SMSF Changes In Overview SIS Act 1993 amended 24th of September 2007 SMSF can now borrow and charge their assets The property is held on trust for the SMSF by anotherentity (Custodian Trustee) SMSF must have the Future right to acquire legalownership of the property Limited recourse Property as security ( Held by a separate trust) Guarantees in a personal capacity only 5. The New Super Story. puts you in controlSIS Act requirements Cant transfer personal property to the Fund Separate Trust for each property (purchase) SMSF to establish new Property trust & trustee Borrower: SMSF (not Custodian Trustee/Trust) No top-ups or re-draws allowed (SIS Act) Acquire a new asset (purchase, not re-borrow) 6. The New Super Story. puts you in control Get educated with the right team You have Trustee responsibilities Min 20% Deposits by fund (5:1 gearing) Compliance is a key issue (ASIC, ATO, ACCC, Super Commissioner) Requires a special trust structure to comply SMSF borrowing has more set up requirements thannormal Negative Gearing Need to have Accounting, Legal and Financial advice Purchase contract and document timing is CRITICAL 7. The New Super Story. puts you in controlRecent Government Announcements. On 14 September 2011* saw a relaxation of the restrictions in placeover SMSF Borrowing arrangements, key points are: Borrowed funds can now be used to maintain or repair Existing cash reserves can be used to improve a property Purchased property can be brought up to a standard to rent out but not improved. As long as the assets doesnt become a different asset, 3 bedroom v 4 bedroom house. Improvement can be made to refurbish a kitchen, addition of a pool or new garage. (The rules previously prohibited any improvement or substantial repair. These constituted a replacement asset and was a breach of the rules. As a result the entire structure failed and need to be dissolved). This represents a significant shift in the ATOs overall view. Id expect to see more interest in the SMSF Borrowing as a result and therefore put more pressure on exciting supply.* 2011 a draft ATO (SMSFR 2011/D1) ruling was issued 8. The New Super Story. puts you in control The seven main questions you need to asked : -1. Whats the difference in running costs?2. Whats the difference in end result $$ ?3. Can I do it?4. What are the funding requirements?5. What type of properties?6. What does it cost to setup?7. Is it complicated to do ? 9. The New Super Story. puts you in controlQ1. Whats the difference in running costs?Total Debt $450k Total Debt $325k Tax SMSF Deposit 21% 21% TenantTenant47% 47% Your 9% Super YouContribution 33%33% Out of Pocket Out of pocket$0/ wk $150/ wk NO Deposit Negative Gearing $125k Deposit Super Gearing with deposit 10. The New Super Story. puts you in controlQ2. What is the difference in end result $$$810kExtra from gearing $210k extra Gearing$120kVsextraNon - GearingCash on Cash(7.2%) 11. The New Super Story. puts you in control Q2Exciting CGT comparisons when property is SoldPurchase EntityPersonalS.M.S.F > 10 Years intoTerm Held > 10 Years> 10 Years Pension PhasePurchase Price$500,000$500,000$500,000Sale Price$1,000,000$1,000,000 $1,000,000Gross Gain$500,000$500,000$500,000Depreciation$100,000$100,000$100,000ADD BACKCGT Assessable$600,000$600,000$600,000% Assessable 50% 67%67%Taxable Gain$300,000$400,000$400,000TAX Rate 33% 15% 0%CGT Bill$100,000 $60,000 $0 12. The New Super Story. puts you in controlQ3. Can I do it? Three part answer Will the bank lend the money? Finance Specialist (Borrow ability) Can they cash flow and structure to buy? Financial Planner (Risk profile) Solicitor ( Legal advice) Is it right for now ? Accountant (All things considered is it a GO)Banks will not lend without their approval! 13. The New Super Story. puts you in controlQ4.Funding RequirementsBank Requirements Most want 20% Deposit Funded by rent and existing contributions Secured by the Asset trust (Limited Recourse) Personal Guarantees, not as membersIPP - Requirements Safety buffers (Inside Super and in Personal world) Must be buying value Must have a desire for change 14. The New Super Story. puts you in control Q5.What types of properties?Security location - metropolitan & major centers onlyStandard residential home or unitRetail, office, warehouse, industrialProperties up to 1 Hectare in sizeNo specialised properties 15. The New Super Story. puts you in control 16. The New Super Story. puts you in control 17. The New Super Story. puts you in control 18. The New Super Story. puts you in control 19. The New Super Story. puts you in control 20. The New Super Story. puts you in control 21. The New Super Story. puts you in control 22. The New Super Story. puts you in controlQ6. What are the set-up costs? Typically $2,000 to $4,000 depending onwhat you have in place.(These costs are paid by the SMSF) 23. The New Super Story. puts you in controlQ7. Is it complicated to do ? No, your network of specialists absorb the difficulty Must know the risk 5 types of specialist advice required There are compliance traps (ASIC, ATO, ACCC, Super Commissioner) Structure and timing are important An investment mindset is paramount A system makes it easy 24. The New Super Story. puts you in controlPutting on a business hat.does itmake good business sense?1.Will revenues exceed expenses?2.How is cash flow maintained until I retire?3.Focusing on cash flow instead of profits.4.Underestimating the competition?5.What type of properties?6.Inadequate capital? (Expenses are going to be higher, revenue slower)7.Underestimating the time needed to break even?8.Overestimating the size of the market (Start small grow fast).9.Make sure you collect the receivables10. Having an exit strategy. 25. The New Super Story. puts you in control Finance Specialist Compliance PropertyStructuringProfessionalAccountant Financing IntelligenceSMSF Contracting IntegrityIPP attitude aptitude IntensityFinancial Solicitor Planner 26. The New Super Story. puts you in controlBenefits to clients Super funds can now gear at about 3:1 Properties are protected by SIS Act Separate funding to your other commitments Minimal out of pockets for the client ( Paid from 9% SGC) Principal can be paid off by tax deductible contributions Reduced capital gains Tax (0% - 15%) Deposits and costs are paid by the fund Increases assets and capital gain potential in fund 27. The New Super Story. puts you in controlThe Fine Print !When purchasing. Dont sign a contract for a property & then look at setting up a SMSF & borrowing arrangement will breach the super rules Dont pay a deposit for a SMSF borrowing property from personal funds may create stamp duty issues later on Ensure that the correct name is on the contract of salei.e. Bare Trust may create stamp duty issues later onOngoing holding.. Borrowed monies can only be used to repair or maintain a property! Any borrowed amount used to improve a property will be in breach of the rules & cause the structure to fail Only existing SMSF cash can be used to improve a property, proceed with caution! Cant go beyond its original character Originally 3 bedroom 1 bath to a 4 bed with 2 bath will cause a breach of the rules 28. The New Super Story. puts you in control ProtectionSISFinance AccountantsSpecialists QuantityYour SolicitorsSurveyorsPropertyFinancialManagersPlanners SMSFPropertyInnovative Developers Quality designBuildersWe want you to join ourInvestment Property Program (IPP)