Looking to buy property? Why not use your Super?

Investing in Australian property can seem like an unattainable dream. But did you know that you can use a self-managed super fund (SMSF) to buy property through your super - and potentially boost your retirement savings at the same time?

3 reasons to consider Property investment with your Super

Buy property with SMSF

1. Diversify your Fund assets

A key benefit of SMSF is that they offer a wider range of investment options than traditional super funds - including direct property. By spreading your savings across asset types, you may help reduce risk while still investing for growth.

2. Build a bigger portfolio sooner

An SMSF can borrow to invest in residential or commercial property, with lenders typically funding up to 70% or 80% of the purchase price. So you can take advantage of low interest rates to build a bigger portfolio now, and potentially earn more income and capital growth in the future. As long as your returns outpace borrowing costs, you'll come out ahead.

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3. Potentially save on tax

SMSFs can use negative gearing to claim a deduction for borrowing expenses, just like individuals. And investing through an SMSF can have other tax advantages as well. Rental income paid to your SMSF is generally taxed at just 15%. And if you commence a retirement phase pension in your SMSF, then the rent you receive is tax free. More importantly after commencing a retirement phase pension in your SMSF, any capital gain when you sell the Property is also tax free!

Tips and tricks to bear in mind!

While investing in property through your SMSF can be an attractive strategy, there are a range of rules you need to observe, plus some pitfalls for the unwary. Here are some of the most important.

1. Check your investment strategy.

Like any other investment decision, your property purchase needs to conform to your SMSF's written investment strategy.

2. Use a non-recourse loan.

SMSFs can only use a limited recourse loan, when purchasing a Property. So if something goes wrong and the fund defaults, its other assets aren't at risk.

3. Remember the sole purpose test.

Your investment must be for the sole purpose of saving for retirement - which means you can't use your super to pay off your own home or buy a holiday home, for example.

4. Avoid related party transactions.

It's also against the law to buy, sell or rent a residential property to or from a fund member, trustee or a relative. That means you can't transfer a residential property you already own into your SMSF, for example. The rules for commercial property are slightly different, with business owners often choosing to buy premises through an SMSF, then rent them back to the business at commercial rates.

If you're interested in investing in property through an SMSF, ESUPERFUND helps makes it easy, with a fast, streamlined process. And if you act now, ESUPERFUND is offering a Special Free Offer! Click here for details.

Before you start

An SMSF can be a great vehicle to take back control of your Super but an SMSF may not be right for everyone. We have conveniently summarised other factors to consider when contemplating setting up an SMSF here. We also assist you in understanding what is involved in the ongoing management of your SMSF via our Free SMSF Learning Centre here.

If you want to learn more about SMSFs, download an information pack today.

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"The highlight in owning property within a self-managed super fund is that we’re one step closer to our long-term goal."
- Catriona, NSW
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