Page 18 - Loan Structure Solutions

13) Offset accounts (almost a must)

Offset accounts can be very valuable in a Trust environment as the
Trust can accumulate surplus cash in an offset and use it in the future
to make capital distributions – much like when a super fund converts to
paying a pension. Also, using some cash savings in the future to
accumulate a share portfolio can be equally attractive given a
discretionary trust could potentially stream the share dividend
imputation credits to beneficiaries that enjoy the most benefit from
them. The point is that you should carefully consider if you need an
offset because some lenders will not offer offset accounts where the
loan is in the name of a Trust.

14) SMSF Borrowing

In late 2007, one of the last pieces
of legislation passed by the Howard
Government allowed super funds to
borrow under certain arrangements
(previously super fund couldn’t
borrow at all). Over the last few
years, this ‘opportunity’ has
attracted quite a lot of attention. In
my opinion, the law is cumbersome
and ill-considered and as such has
created probably just as many
problems as it has opportunities.
The concept of a super fund using
borrowings to increase its
investments is a very good one if used safely. Essentially, by borrowing
you are investing your future super contributions now. Assuming the
Fund invests in a quality investment, it is a fantastic solution to funding
retirement. We all know how (a safe level of) gearing is a powerful
wealth building tool.

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