Home' SMSF Professionals Association of Australia : SPAA Yearbook 2013 Contents SPAA.2013.25
NEW SMSF TRUSTEES
Karen and Richard Gaunt are both
40 years old. Richard is the owner and
managing director of the strategy and
program management consultancy
Bene t Management, and Karen is a
consultant to the rm. Their SMSF will
have a corporate trustee, with each
being a trustee director.
Richard Gaunt says that the estate
planning is being undertaken to
ensure that, in the event of death, the
surviving spouse and the couple's two
children are nancially looked after in
a tax-e ective way.
Warrick Hanley worked with the
Gaunts to create a model that would
encompass their general nancial
planning and estate planning needs
and goals. Hanley then coordinated
the advice of an estate-planning
solicitor and the Gaunts' accountant
to test the model.
Indeed, Hanley describes himself
as the Gaunt family's chief nancial
o cer, or CFO, because of his
coordinating role. "I project manage
the Gaunts' other professional
advisers to make sure we are all
swimming in the same direction."
Richard Gaunt adds: "The way that
Warrick works, he makes sure all of
the professionals are kept in the loop.
Everyone knows what everyone else is
doing. The advice is consistent." Given
his project management consultancy,
Richard says this approach really
appeals to him.
Both Gaunt and Hanley say that an
SMSF provides a greater degree of
exibility than a large fund to achieve
the couple's estate planning and
retirement planning objectives.
Brie y, the estate planning involves
taking out life insurance policies
within the SMSF for the lives of Karen
and Richard. In the event of death,
the super fund would pay pensions
to the surviving spouse for life, and
to the children until age 25. (The
pension incomes are tax-e ective,
with the recipients receiving a 15 per
cent tax rebate.)
Finally, testamentary trusts for
each of the two children -- nanced
by the super and non-super assets
from the last surviving spouse -- come
into existence once both parents are
deceased. "It is a 54-year plan,"
SPAA specialist adviser Michael
Hutton recently established an SMSF
for a 50-year-old client who intends to
buy a farm through the fund.
Hutton, a wealth management
partner with HLB Mann Judd in
Sydney, explains that this client's main
assets following a divorce are the
savings in his retail super fund.
The new SMSF will nance the farm
with the savings rolled over from the
retail fund and by taking a limited-
recourse loan. In turn, the client will
rent the farm from his SMSF and then
work the farm himself.
As business real property, the
SMSF can rent the farm to the fund
member without being subject to
the in-house asset rules. The client
will personally nance the business
side of the farm himself.
This case study truly highlights the
exibility of an SMSF, despite the strict
rules on investments and gearing.
"The client came to us and told us
what he wanted to do," Hutton says.
"We advised him on what is allowed
and what is not allowed. And we
explained how the arrangement
should be structured."
Mann Judd established the SMSF
and is setting up the necessary bare
trust to hold the farm until the nal
loan instalment is made. The rm
will administer the fund, do the
accounting work, and give advice on
such matters as contributions and
The couple with
Michael Hutton recently set up an
SMSF for a couple, aged 66 and
62, who have a clear objective: to
progressively contribute $2 million
from outside the super system into
their new fund. The money is currently
This will involve Hutton advising
the couple, who are still working, on
how to maximise their concessional
and non-concessional contributions
each year without exceeding their
As Hutton explains, the "use it or
lose it" nature of the contribution caps
-- meaning that members cannot take
advantage of unused contribution
caps in later years -- makes it
necessary for the couple to contribute
as much as possible each year.
He estimates that it will take
approximately six years to contribute
the $2 million into the SMSF. As the
wife is not yet 65, she can use the
bring-forward rule and make non-
concessional contributions of up to
$450,000 in a single year, every year,
until she reaches 65.
This case study is an excellent
illustration of how a specialist adviser
can guide clients to achieving a
THE NEW SMSF WILL
FINANCE THE FARM
WITH THE SAVINGS
ROLLED OVER FROM
THE RETAIL FUND
AND BY TAKING A
LOAN. IN TURN, THE
CLIENT WILL RENT
THE FARM FROM
HIS SMSF AND THEN
WORK THE FARM
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