Directly held property makes up approximately 19% of all SMSF assets, indicating that many SMSF trustees consider it’s an important and significant part of a diversified portfolio. There are numerous strategies and ways for property to form part of an SMSF’s investments and each must be carefully considered. Investment strategy first! Before any investment decision, it is imperative and a legal requirement that you as an SMSF trustee must consider your investment strategy. Your strategy should detail such things as how much exposure you would like to the property market, the form of exposure and how appropriate it is for your current circumstances. A well-diversified portfolio is essential to provide income for retirement and spread investment risk so that any single asset class, such as property, does not dominate your SMSF risk and returns. Direct investment A common form of property exposure is direct investment into a property. This can be in the form of either a residential property or commercial property. When purchasing a property with an SMSF’s cash there are some important considerations that must be worked through including: Your asset allocation and diversification. Potential rental income and property expenses. How close you are to retirement and the need for liquid assets to pay pensions. Unless the property is a business real property (BRP) you or your related parties cannot use the property: If the property is BRP you may be able to work from the premises which is owned by your SMSF. You may also be able to utilise the small business CGT concessions and contribution limits. Limited Recourse Borrowing Arrangements (LRBA) SMSFs may also invest in property through an LRBA. These are complex borrowing structures which allows SMSF trustees to take out a loan from a third party lender. The SMSF trustee then uses these funds to purchase a property to be held on trust. The lender only has recourse to the property held in the trust – this is why the loan is “limited recourse”. An LRBA should only be utilised when it is the right structure for your SMSF on the basis of SMSF Specialist advice. Some very important considerations in addition to the ones above include: Can your SMSF maintain the loan repayments over a long period of time considering asset returns, interest rates, liquidity, and contributions caps? Evaluating set-up costs and structures. Is your property valuation accurate? You cannot use borrowed money to improve the asset or change the nature of the property at any time. Do you meet the strict bank lending requirements? Typically, lenders require the SMSF to have a minimum of net assets of $200,000 or more and for the loan to have a loan to value ratio below 70%. Indirect investment Another way to gain exposure to property for SMSFs is through indirect investment. This can include listed invested vehicles such as listed investment companies and exchange traded. Managed investment trusts are also a common investment for SMSFs to gain exposure to property. Investing indirectly may suit your SMSF needs more than a purchase of a property because it is relatively simple and most likely will not require a large amount of capital. It also allows your SMSFs to get exposure to large value properties such as office blocks, shopping centres and industrial properties that would otherwise be out of reach. Investing in these products should be accompanied by SMSF Specialist advice. How can we help? SMSF Specialist advisors can help you understand how the different forms of property investment may or may not be relevant for your SMSF portfolio and the impacts it may have on you and your fund. Please feel free to give us a call to arrange a time to meet so that we can discuss your particular requirements, especially in regards to what property investment would be most appropriate for your SMSF. For further information, visit the SMSF Association’s Trustee Knowledge Centre ( http://trustees.smsfassociation.com/ ) to keep up to date with different asset classes you can invest in within your SMSF, including property, and reach your financial goals. As always, the above information is general in nature and may not be suitable for your circumstances. If you require advice, give the team at Design Financial Advisory a call today on (08) 6263 9933 to discuss your needs.

The sandwich generation is a term used to describe people who are caring for their children as well as their aging parents. It can be a stressful and tiring position to be in, and can put strains on both your financial and emotional wellbeing. It’s important to get your own finances in order first so that you can be in a better position to help aging parents or children who are ready to leave the nest. Here are 6 financial strategies to help take the pressure off. Make a plan When looking after multiple generations, it can feel like you’re being pulled in several directions at once. It’s important to take the time to make a plan and consider your own financial goals before making any big decisions. When you’ve made a plan, you can feel more confident moving forward. Talking with a financial advisor can help you consider all your options and may even open doors you may not have considered. Understand your parents’ finances As your parents get older, they may need assistance with managing their finances even if they don’t need direct financial support. You should discuss things like their assets, debts and income sources, their living arrangement goals as they get older and estate options in case they can no longer manage their own affairs. Discuss with your family If you have siblings, it’s important to talk with them about how you will divide the responsibilities of caring for your parents. Keep in mind that not all responsibilities are financial. If there is an imbalance in how much support each sibling provides, you may want to discuss the option of repayment using your parents estate if appropriate. Involve your children If you have adult children still living at home, consider ways they could help the household financially. Discuss the option of them paying some rent or covering some of the weekly household expenses. This can be a good opportunity for them to learn financial and budgeting skills before moving out for the first time. Protect your income If you have two – or three – generations depending on you, it’s important to protect your income in case something should happen to you.  Your life and total and permanent disability insurance policy should be able to take care of your mortgage and any major life expenses to ensure you and/or your loved ones are looked after. Trauma (or critical illness) insurance can provide a useful injection of money to pay for medical expenses and provide continuity for supporting loved ones while you recover. If you’re not sure what coverage you need, speak with Lawrence Group about your priorities and ways to get the best coverage for your budget. Consider government assistance Research into government subsidies that you, your children or your parents may be eligible for. Centrelink is a good place to start for childcare subsidies, rent assistance and carer entitlements. Also check out My Aged Care website to apply for an aged care assessment. Seek professional help It can feel overwhelming to be responsible for both your children and your parents and it’s important to reach out for help if you need it. Getting professional financial advice can help you feel more confident and at ease going into the future. As always, the above information is general in nature and may not be suitable for your circumstances. Chat with the Lawrence Group team about how we can help.