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Five benefits of buying property with SMSF

Updated: Apr 13

Have you ever wondered what the benefits of using super to buy an investment property are? Here, we explore our favorites…


What is SMSF?


SMSF stands for Self-Managed Super Fund. This is a private fund that's managed by an individual. In comparison to other funds, the members of an SMSF are generally the trustees and run their own fund for their own benefit. Trustees are still responsible for complying with the laws and regulations around super and tax.


Buying property with super


SMSF loans allow for trustees to borrow for the purpose of an investment in real estate. Conditions must be met for this to occur. For instance, you need to ensure that you seperate funds from personal and business affairs.


You can borrow through SMSF for both commercial and residential real estate.


If you’re using super to buy an investment property, the ownership of the property will be held in a custodian trust until the full loan is repaid. Throughout the duration of the loan, “SMSF members have a beneficial interest in the property.”


Benefits of using super to buy an investment property


There are great benefits of buying property with super. Specifically, your self-managed superannuation fund. While there are many, we’re going to share our favorites. Here are a few of them, keep reading to learn more.

  1. Tax benefits

  2. Reduced Capital Gains Tax (CGT)

  3. Greater acceleration of retirement savings

  4. Greater control of your assets

  5. The ability to leverage


Tax benefits


When you choose to make an investment in real estate through your self-managed super, you can incur greater tax savings. These savings include:

  • Interest on your SMSF loan

You can reduce your SMSF tax liability by deducting your loan interest at tax time.


It’s beneficial to hire a tax accountant who's well versed in SMSF lending. They can help you identify claimable tax deductions and ensure that you receive the best return.


Reduced Capital Gains Tax


Capital Gains Tax (CGT) is a tax that's paid on the profits you can make from selling assets like property. That is, if the property is held for more than 12 months. According to the Australian Taxation Office, you report CGT on your income tax return.


When buying property with super, CGT is capped at 10%. If you convert your super into a pension, you’re exempt from paying any CGT. This means you can save potentially hundreds of thousands of dollars.


Greater acceleration of retirement savings


Over the medium to long term, investing in super can increase your superannuation balance
Over the medium to long term, investing in super can increase your superannuation balance

If you’re using super to buy investment property you can grow your retirement savings faster. This is because all income and capital growth from your property(ies) go directly into your SMSF.


Over the medium to long term, it'll increase your total superannuation balance.





Greater control of your assets


A great benefit of using super to buy an investment property is that you can gain greater control of your assets. Compared to other investment products, property can give you a greater sense of control due to its tangibility. Property can offer greater income and capital growth potential. It also doesn’t fluctuate as much as other assets.


With SMSF you can also manage your own investment strategies and diversify your portfolio.


The ability to leverage


Buying property through your self-managed superannuation fund gives you the ability to leverage your assets. It provides you with the opportunity to use your capital growth and rental income to borrow against and fund further property, through your SMSF.


For more information


Borrowing funds to purchase an investment property through SMSF isn’t a suitable strategy for everyone. It's best to consult a financial advisor to determine if it’s a good strategy for you.


REIF can put you in touch with network financial advisors. Please reach out on the details provided for further assistance.


Ph: 1300 130 932

Email: clientservices@reif.com.au



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