Property Investing Using Super

Self-Managed Superannuation Fund (SMSF)

Self-Managed Superannuation Funds (SMSFs), regulated by the Australian Taxation Office (ATO), offer individuals more control over their retirement savings and are established by individuals for the purpose of creating wealth for retirement. SMSFs can have a maximum of four members who also act as trustees, responsible for all investment decisions within the fund and compliance with relevant laws and regulations.

SMSF Property Investment

PROS:

• Control:

Investors have control over the property choices within their SMSF.

• Tax Benefits:

SMSFs offer tax benefits which motivate many to use their self-managed super fund for real estate. Tax rules for SMSFs can be complex, so always seek professional advice.

  • No capital gains tax to be paid after retirement,

  • You will only pay a maximum of 15% on rental income after expenses and any capital gains on the disposal of property, unlike your personal tax rate of up to 45%

  • Depreciation of the property is tax deductible

  • Property investment related insurance is tax deductible

  • Tax deductions for loan repayments

  • Claim tax deductions on other costs related to managing the property (management fees, maintenance, gardening, etc)

• Long-Term Investment:

Property investments through SMSFs can be great for long-term wealth accumulation

• Diversification:

Allows diversification of investment portfolio beyond traditional assets

• Asset Growth:

Properties have the potential for capital growth over time, creating a favourable environment for building long-term wealth accumulation

• Borrow using Self-Managed Super Fund:

Many people don't know they can use an SMSF loan to buy investment properties.

With an SMSF loan, expand your investment options beyond current funds and create a stronger investment plan using LEVERAGE strategically.

When you get an SMSF loan, your superannuation payments help cover the loan.

This means part of your salary before taxes goes towards repaying the SMSF loan.

• Home for your future retirement:

Generate income from your super fund property investment to secure a future home for retirement. Invest in a house, rent it out, then purchase it from your fund for retirement living

• Secured investment:

Property owned by a Self-Managed Super Fund is safeguarded from general debt collection and bankruptcy processes.

SMSF Property Investment

CONS:

• Complexity:

SMSF property investment comes with complex rules and regulations that must be followed

• Property usage restrictions:

The property must be leased to non-family tenants until retirement

• Liquidity:

Property is not a liquid asset, making it difficult to sell quickly if needed

• Costs:

Property investment can have high entry and ongoing costs, such as stamp duty, property management fees, legal costs impacting overall return

• Risk:

Property markets can be volatile, posing risks to the SMSF's performance

• Limited Borrowing:

SMSFs have limited borrowing capacity for property investments, which can restrict options

This structure provides flexibility in choosing investments, including direct property purchases, but comes with significant compliance responsibilities.

Trustees must adhere to strict rules to maintain compliance and manage administrative tasks such as annual audits and tax returns.

SMSFs are suitable for individuals seeking greater control and flexibility in managing their retirement savings, along with a solid understanding of financial and legal obligations.

It is recommended to consult professionals such as an SMSF experts, financial advisor, tax accountant before making any decisions.

Disclaimer
The information provided in this article is for general informational purposes only and should not be construed as professional advice. While every effort has been made to ensure the accuracy and completeness of the content, we make no representations or warranties of any kind, express or implied, about the accuracy, reliability, suitability, or availability with respect to the article or the information, products, services, or related graphics contained in the article for any purpose. Any reliance you place on such information is therefore strictly at your own risk. We strongly recommend consulting with a qualified professional or financial advisor before making any real estate or investment decisions. Check our full disclaimer and Privacy statement. 

IMPORTANT: We strongly advise you to seek independent legal and financial advice regarding compliance with the Superannuation Industry (Supervision) Act 1993 and the implications of property investment through a Self-Managed Superannuation Fund (SMSF).