What is SPI Plus?
OVERVIEW
The recent changes to superannuation regulations have created a greater incentive to invest in Super. Babcock & Brown have taken this opportunity and created a simple structure that allows SMSF's to acquire a direct interest in residential property, without having to pay the full purchase price upfront - Superannuation Property Instalments (SPI) Plus.
SPI Plus is simple and flexible. Your super fund contributes a First Instalment to the purchase price of the property and then can decide each year to continue to pay interest only or to pay an instalment towards the outstanding balance of the purchase price. When the purchase price of the property has been fully repaid, title to the property is transferred to your super fund.
You can choose your own property (subject to normal lending criteria) or, if you'd prefer, you can select from a broad range of pre-approved properties ready to be bundled with SPI Plus.
To see the selection pre-approved properties click here
For further information about Babcock & Brown please click here
USING SPI PLUS TO PURCHASE AN INVESTMENT PROPERTY
Investing property with SPI Plus is similar to buying an investment property outside of your super fund. However, you can take advantage of the benefits that come from the tax efficient superannuation environment.
All the benefits of owning property are available to your super fund from day one. Your super fund is entitled to any capital growth, net rental income, depreciation and tax deductions for interest and outgoings. The real power of SPI Plus comes into play when you use a salary sacrifice strategy to reduce the principal component of your loan. Up to certain limits, salary sacrifice contributions to super are paid out of pre-tax dollars.
For example, if you were paying income tax at the top marginal tax rate of 46.5% (including the Medicare Levy), and you wanted to reduce the principal component of your loan by $25,000, you would need to earn $46,728 before tax. On the other hand, if you took that same $46,728 and salary sacrificed it to your super fund to make an instalment payment to your SPI Plus Loan you'd reduce the loan balance by $39,718. That's a saving of $14,718.
In addition, Capital Gains Tax (CGT) inside super is a maximum of 10% and can even reduce to zero, if your fund is in pension phase. Outside super, CGT can be as high as 23.25%. Therefore if your property was originally purchased for $500,000 and sold for $750,000 and CGT was applicable your CGT liability inside super would be a maximum of $25,000 compared to $58,125.00 outside of the superannuation environment. A further potential saving of between $33,125 (or $58,125 if your fund is in pension phase).
USING SPI PLUS TO PURCHASE AN INVESTMENT PROPERTY
If you've decided that an investment in property fits with your super investment strategy, you'll need to contact your financial adviser and read our detailed Information Memorandum.
You can get a copy of the Information Memorandum from your financial adviser, or if you don't have an adviser, by calling the SPI Plus Client Service team on +61 2 9299 1800, or download here.
SPI Plus provides your super fund with the opportunity to use residential investment property for wealth creation purposes. This structure involves a form of instalment contract, including the following features:
- Your super fund pays a minimum deposit of 20% of the purchase price of the property (plus other upfront fees and costs)
- You can choose to pay interest only or to pay additional instalments
- You can defer the payment of the Outstanding balance of your loan for up to 10 years
- Your super fund is entitled to all property gain from day one (including net rent and capital gains after all outgoings)
- Your super fund is entitled to any upside from the sale of the property (after fees, costs and the Outstanding Loan Balance have been paid)
- There is no recourse to any other assets held by your super fund or to the members of the super fund
- Interest is payable quarterly, in advance
- When the balance of the purchase price has been paid, title can be transferred to your super fund
To find out more contact your financial adviser and ask them about Babcock & Brown SPI Plus or click here.
The timeline below sets out the steps involved in buying an investment property through SPI Plus.
