SMSF Property Investment

A self-managed super fund (SMSF) is defined as a fund established by one to four people for the sole purpose of providing retirement benefits.

While SMSFs enjoy the same financial benefits and concessions as retail or industry super funds, the key difference and the attraction for many people is the ability for members to take personal control of the assets invested.

In the recent years, one of the popular investment decisions with SMSF is investing in property involving residential or  commercial real estate. There are some important rules and restrictions that affect purchasing residential property through SMSF:

• The property cannot be purchased from the related party
• The property cannot be the residence of a fund member or leased to a related party of the fund member
• You cannot use it as a holiday home
• Property should be purchased solely for investment purposes

There are a number of tax benefits when purchasing property through SMSF:.

• You pay only 15% tax on the rent you receive or 0% tax when you retire
• You’ll pay no tax on the capital gains if you sell or if you continue to own it when you retire
• Capital gains and rent earned by SMSF is taxed currently at 15% before retirement. If you hold the property for more than 12 months, you will pay only 10% tax on capital gain because of the tax concession.

There are also some cons to be aware of with SMSF and purchasing property (SMSF property investment):

• • You cannot renovate a property purchased, whilst money is borrowed against it
  • Running a SMSF can be complicated but having professional SMSF consulting advices regularly can help you stay compliant and within the rules
  • Higher bank fees involved in getting a loan through SMSF

The best advice is to seek a SMSF Consultant, such as Easy Super, who can explain how to setup and manage your self managed super fund. For obligation free consultation please call our SMSF Specialists on 0432 366 690.