Property investment options:

SMSFs v Discretionary Trusts

There are tax advantages in relation to using a discretionary family trust or a self-managed superannuation fund (SMSF). However, one question that needs to be answered by investors is: “When do you wish to realise any profits from the property?”

For those who wish to retire in the lap of luxury, betting on longevity and good health, then a SMSF could be suitable.

Conversely, for those living for the now and with a large family, a discretionary trust arrangement where the wealth can be immediately shared is typically preferred.

So what are the pros and cons of each type of structure for property investment? The following may answer many questions.

• If you wish to keep set-up costs down then a discretionary trust would be the preferred vehicle.
• Compliance costs associated with SMSFs are greater, but generous tax concessions exist.
• A discretionary trust provides greater flexibility in borrowing and redrawing equity for personal use.
• An SMSF provides more generous tax concessions relative to a discretionary trust.
• Funds are readily accessible from a discretionary trust compared with an SMSF.
• The concessional tax rates available to SMSFs upon the death of an individual makes a SMSF a useful estate planning tool.

Banyan Consulting offers consulting services on SMSFs and trusts, please contact us on 02 9283 9888 or email reception@banyanconsulting.com.au to book a meeting.