Buying Property in Your Self Managed Super Fund
This is not actually a new concept, however, I have seen an influx of buyers from the
“Baby Boomer” generation who have lost faith in traditional super fund methods and under the careful guidelines of their accountants and financial planners are transferring or creating self managed super funds amongst other things, purchasing property through this system.
There are few things you need to know before you begin…
To help you understand this system better, I asked Damon Bensein from Elston Partners who specialises in Investment Advice & Portfolio Management to answer a few common questions.
What is a Self Managed Super Fund?
A Self- Managed Super Fund is a tax structure that can be setup for the benefit of no more than 4 individual members. The advantages of utilising a SMSF structure are:
- Concessional tax rate capped at 15% on all Capital Gains on income generated within the SMSF
- Flexibility to buy investments directly ie. Shares, Term Deposits, Property
- Own and pay for Life Insurance Policies within the fund
- Improved Estate Planning
- Increased Control and Transparency
- The ability to borrow
- Asset Protection
Why Would You Buy Property in a SMSF?
The main reason for buying any asset within a SMSF is due to the tax concessions available. As mentioned above, tax on capital gains and income generated by the asset held within the SMSF is capped at 15% as opposed to a maximum of 45% in your own name depending on your marginal tax rate.
There is a possibility once certain conditions are met that the SMSF will actually pay 0% tax on any capital gains and income earned by assets within the SMSF.
There are also asset protection benefits by owning assets within a SMSF structure as opposed to individual names.
How Can You Buy a Property in a SMSF?
You can borrow within a SMSF and it is becoming more common for people to look at this strategy. However there are conditions that need to be met. It is best that clients talk to an adviser first before considering this strategy to make sure the client strategy is appropriate for them and they are fully aware of the benefits and risks involved.