Bricks and Mortar

In your super

Rents are rising Interest rates are falling

Property is outperforming shares

$ $ $

1

CONTENTS

Contents 1

No Advice Warning 2

Letter from the Founder and Managing Director of Menzies Financial Group 3

Property in Superannuation 4

Cash-flow Chart 4

Who can have a Self Managed Super Fund? 5

Making the Comparison between Property and Shares in Super 6

Why use Super to Invest in Property 7

Cost Comparison between SMSF and Retail Fund 7

Menzies Commercial & Super Fund Loans 8

Contact us 9

2

NO ADVICE WARNING

This e-book contains general information only.

The information in this e-book is general information only and has been prepared without taking

into account your personal objectives, financial situation or needs. You should consider any

advice in this e-book in light of your personal objectives, financial situation or needs before

acting on it.

You may wish to consult a licensed financial adviser to do this.

The information in this e-book is no substitute for financial advice. If you are considering

acquiring a financial product you should obtain a Product Disclosure Statement and consider its

contents before making any decisions.

Menzies Financial Group and Menzies Commercial & Super Fund Loans assumes no

responsibility for any actions you take independently and without seeking professional advice

from a licensed financial adviser can be assumed.

3

Letter from the Founder and Managing Director of Menzies Commercial & Super Fund Loans

Dear Reader,

We are delighted to provide you with a free copy of this eBook:

Bricks and Mortar In Your Super

We hope you find this beneficial and that you are able to utilise the information to better your

financial position.

Our goal is for you to be able to make informed and educated decisions along life’s journey.

Ring us today on (02) 9907 2257 to make an appointment. Introductory meetings are free and

carry no obligation.

Or make an appointment (or ask any question) directly via our website

www.menziesfinancial.com.au

Best regards,

Paul Oliver

Managing Director

4

Property in Super New legislation now allows Self Managed Super Funds to borrow to invest in residential, commercial or industrial property. This is a major break through for investors as it gives them the chance to leverage into property with low or even zero cash flow cost. (no affect on your personal cash flow)

Who can do this? Anyone with a Self Managed Super Fund that has enough super to pay for the deposit on a property. Up to 4 peoples super can be combined to achieve this. Many family members or business partners are combining their existing super and establishing their own super funds. (contact us for more information)

How is it possible to buy property with zero cash flow cost? The rent and your 9% super contributions are often enough to pay off the loan.

For example:

Property Purchase of $400,000, borrowing $287,050, Depreciation $9000 1st year

2 x Members Salaries of $80,000 each.

The deposit and purchase costs are fully paid by the self managed super fund

Weekly Cash Flow Annual Cash Flow

Super contributions (9% of salary) $277 $14,400

Rental Income (5% yield) $385 $20,000

Interest on cash buffer (4.3% rate) $12 $645

SMSF Tax Credit $1 $61

Interest Costs (7.3% rate) -$403 -$20,995

Property Expenses (20% of rent) -$77 -$4,000

Costs to manage fund -$29 -$1,500

Cash Flow $166 positive $8,652 positive

5

Who can have a Self Managed Super Fund? Any person either alone or with their spouse can establish a Self Managed Super Fund. A Self Managed Super Fund can even include friends, family or business partners up to a maximum of 4 members.

Who controls the superfund and the property? You do. Unlike the majority of people who have retail super funds a Self Managed Super Fund let’s you decide when and where your funds are invested.

Is property better than shares? Historically property has been a more stable investment than shares. Property doesn’t suffer the volatility that shares suffer. Many people who borrowed to invest in shares have lost their wealth in recent share market instability but the same can’t be said about property. The graph below produced by Alan Kohler of the ABC news highlights the net return of property against other investments. According to the graph since 1987 property has produced the best returns.

6

Making the Comparison

John and Mary Bob and Jane Current Salary $160,000 $160,000

Current Super Contribution 9% of salary to retail fund

9% of salary to self managed super fund

Current Contributions $14,400 pa $14,400 pa

Superannuation and Investment Choice

Retail super fund with balanced managed

funds as per the employers default fund.

Gearing into residential real estate through a Self Managed Super

Fund. Superannuation balance at 40

years of age $150,000 $150,000

Value of fund at 60 years of age $708,596 $1,658,249

Value of fund at 65 years of age $934,866 $3,358,166

Lifestyle at 60 years of age $46,808 $89,176 Lifestyle at 65 years of age $70,629 $151,373

Assumptions

1. Balanced managed fund return of 5% based on the 10 year returns from the 2011 Long Term Investing Report by the ASX and Russell Investments.

2. Retail superannuation fees and charges of 1.6% based on the 2006 ASIC report of 1270 superannuation products

3. Superannuation income tax and contributions tax rate of 15%.

4. Residential real estate growth rate of 5% pa.

5. Rental Returns of 5% of property value.

6. Cost of purchasing the property (stamp duty, legal fees, etc) assumed to be 5% of property value.

7. Cost of holding the property (rates, repairs, etc) assumed to be 20% of rental income

8. Costs of running a self managed super fund assumed to be $1500 pa

9. Bob and Jane purchase property for $400,000 with a loan of $280,000 (70% LVR)

10. Depreciation based on new building cost $200,000 and Fixtures $40,000

11. Interest rate on loan assumed to be 7.3%, interest rate on cash held of 4.3%

12. Inflation rate of 3% (applied to salary and self managed super fund costs)

7

Why use super to invest in property? Superannuation receives favorable tax incentives. While in the accumulation phase income is only taxed at 15% and capital gains at only 10%. If the fund is in pension phase income tax and capital gains tax are zero.

Can I use the property? A residential property must be rented to an arms length third party while the property is owned by the Self Managed Super Fund. It’s possible to transfer the property into your own name after retirement. Commercial or industrial properties can be rented to the funds members; this can be a highly effective strategy for business owners.

How much does it cost to have a Self Managed Super Fund? Any establishment and ongoing management costs are paid by the Self Managed Super Fund. There is no cost to your personal cash flow. Recently the media has been exposing the hidden fees being charged by retail super funds. Some funds are charging up to 2.4% of the funds balance per year. On a $200,000 fund that’s $4,800 a year. A SMSF can be managed for much less. See the cost comparison below.

SMSF Cost Comparison

SMSF Retail Fund

Fund Balance $150,000 $150,000

Management Cost Basis Generally based on number of investments.

Up to 2.4% of funds balance Average 1.61%**

Annual Costs Range from $450* to $2000 Average $1500

Range $1000 to $2400 Average $2,415

* $300 for an audit, $150 government charge, DIY tax return.

** ASIC survey of 1,270 product disclosure statements in 2006 found the average fee charged on a $50,000 retail fund was 1.61%

8

About Us At Menzies Financial Group, our specialised team all work towards your goals; we specialise in

finding you the property, loan, insurance product and advice that best suits your needs and

strive to make the process a smooth and positive experience.

Area’s of expertise:

• Commercial and Super Loans

• Creating Self Managed Superannuation Funds (SMSF)

• Investment Loans

• Home Loans

• Sourcing Investment Properties

• Personal Protection

• Financial Planning

• Insurances

Menzies Financial Group symbolizes: hardworking, loyal, and a community driven business.

The companies at our Head Office on the Northern Beaches of Sydney are:

Menzies Financial Group

Menzies Financial Planning

Menzies Commercial and Super Loans

We are fully accredited member of the Mortgage and Finance Association of Australia.

We are also accredited with Patron Financial Planning

9

CONTACT US

Please take this time to call and speak to one of our experienced advisors.

You can make an Appointment to meet in person OR over the phone. We are here to answer

ANY questions or queries you may have.

www.menziesfinancial.com.au

If you have any questions, you can ask via our website OR phone

Our details are:

Menzies Commercial and Super Fund Loans Pty Ltd

Or

Menzies Financial Group Pty Ltd

Level 2, 2 Powells Road

Brookvale, NSW 2100

Tel (02) 9907 2257

info@menziesfinancial.com.au