Australia’s appetite for property is showing no signs of abating.
And traditionally, Aussies have purchased investment properties personally or through a company/trust.
Did you know you can also buy an investment through your self-managed super fund (SMSF) and obtain a SMSF loan from the banks to help with the purchase?
Let’s see why more and more people are using their SMSFs to purchase an investment property.
While investing outside your SMSF is simpler and there are fewer restrictions on what assets you can purchase, a well-managed SMSF can increase your wealth and be favourable for tax.
Pay less tax
Come tax time, SMSFs pay less tax on rental income. That means your fund can focus on paying back your loan sooner.
Rental income is taxed at 15% and providing the property is held for more than a year, capital gains at 10%, which is lower than most personal investment properties. Once you retire and draw a pension from your fund, both of these are reduced to 0%.
Buy your retirement home
While you can’t live in an investment property that your SMSF owns, or rent it out to family or friends, you can buy a property that you intend to use as your retirement home later.
Once you retire and draw a pension from the fund, you may be able transfer ownership of this property to yourself. It is worth noting that there are restrictions however it’s the perfect investment for anyone planning a sea-change or tree-change in their golden years. Remember though, you will have to pay stamp duty on this transfer, so factor that into your calculations.
With property prices continuing to rise, taking advantage of lower prices now rather than in the future could be a prudent investment strategy.
Your SMSF is your landlord
If you run a business, you purchase your work premises with the SMSF and lease it back from your SMSF if it is a commercial property.
Forget paying off someone else’s mortgage – your fund is the landlord! As an extra perk, your business can still claim rent paid as a tax deduction. Note that any rent must be paid at the market rate, every month – ‘mates rates’ are strictly forbidden and the Australian Tax Office requires detailed evidence of this in the fund’s annual tax return.
You can create an SMSF with friends or family to pool your resources. This allows the fund to buy more expensive properties – such as large commercial assets like a warehouse or office building. This lets you get more bang for your buck as the larger the investment, the more tax you will save, especially if you wait until the fund’s members are retired and receiving a pension from the fund.
A good property purchase made by your SMSF has the potential to grow your wealth through capital gain, providing an income rental and minimising your tax liabilities.
For more information about SMSFs, ask about it to your accountant or contact us.
If you’re interested in investing in property through an SMSF, Go Mortgage helps make the loan process easy.