Buying Property with Your Self-Managed Super Fund (SMSF)
SMSF Property Investment Strategy
SMSF stands for Self Managed Superfund, which is a private fund that you manage yourself. The money that would normally go into an industry or retail Superfund, would go into the SMSF instead. This allows you to choose the investment you want. If your ready to maximise your contributions, we will find the perfect investment strategy for you based on your individual or combined needs. The goal of your SMSF is to maximise your retirement funds and secure your future. An SMSF allows a trustee to consolidate the super asset of up to six members (usually family members or business partners) into one larger pool of funds, which increases your investment opportunities.
The Benefits of Investing in Property with Your SMSF
Buying property with your SMSF allows you to build up your retirement fund rapidly and tax effectively. The benefits include:
- Once you reach retirement and start collecting a pension, any income or capital gains generated by the property will be tax-free.
- If the SMSF holds the property for longer than 12 months before selling, you only have to pay 10% capital gains tax, which is over a 30% discount.
- If your SMSF purchases a commercial property and rents to your business, the rent will be tax-deductible and paying rent to the SMSF will not be seen as a contribution to your superannuation. This is important as there is a cap
of $25,000/per year ($35,000/per year for those over 59) on superannuation contributions.
Buying property with your SMSF allows you to build up your retirement fund rapidly and tax effectively. The benefits include:
- Assets held in SMSF are not considered when applying for small business capital gains tax concessions when retiring or selling the business. Ultimately, if appropriately harnessed, holding property in the SMSF can provide many
tax benefits and set you up for the future.
The Importance of Gaining an Expert's Insight
Nu Wealth understands that if this is new to you, it may be a lot to take in and be quite overwhelming , we specialise in property investment and we suggests investors get specific advice from a qualified accountant before embarking on an SMSF journey, that will allow you to gain insight to the key benefits of building a property portfolio through a super fund. There are many further considerations when it comes to buying a property with your SMSF the amount of tax you pay on rental income from the property and capital gains tax can change over time, and it is vital to be across laws such as these. Therefore, engaging a SMSF compliant accountant will be game-changer. The goal of your SMSF is to maximise your retirement funds and secure your future.
Important SMSF Rules to Keep in Mind
A property bought with your SMSF must only be used for investment purposes. Therefore, if you invest in a residential property with the SMSF, it cannot be lived in by the trustees of the SMSF or anyone related to them. (I.e. if you buy a house with your SMSF, you can’t rent it to a family member, and you can’t purchase a holiday home to live in part-time.)
Also, residential properties already owned by the trustees cannot be put into the SMSF or purchased by the fund. However, a commercial property (a premises for a business) can be sold to a self-managed super fund by its trustees. Unlike residential property, it can be leased to SMSF individual trustees, their businesses, and relatives. The rent must be set at the current market rate, and no “mates rates” can be given to the tenant.
At the end of the day, the property investment (whether residential or commercial) must function as a means to provide retirement benefits for the trustees and members. It is also important to note that if the property makes a loss, the tax losses cannot be offset against the personal tax of the trustees.
*The information on this page is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. For this reason, it is strongly advised that investors considering borrowing through an SMSF should obtain professional guidance before they establish their own super fund, as well as during its ongoing management.
Get in Touch
Contact Us
Copyright © 2023 Nu Wealth. All rights reserved. Site by [CM]Real Estate & Business agents Acts 1978 licence RA 79005
Real Estate Institute of Western Australia Corporate Members