Invest in Property in Your Super Fund
Borrowing within a self managed superannuation fund (SMSF) to invest in property will help grow and manage your future wealth. Changes in legislation in September 2007 means it is possible to acquire property and build your assets by leveraging your super. Learn how this strategy can help you to maximise your retirement.
How does it work?
Your SMSF can make an equity contribution on the property and borrow the remainder of the funds to complete the purchase. Depending on the property type and the mortgage lender you can borrow up to 80% of the value of the property.
You can invest in residential, commercial, retail, rural or holiday apartments. However, the purchase must be for an investment and you can’t live in the property.
The process is as follows:
- If you don’t have a SMSF you will need to establish one and roll over your existing super accounts.
- Establish a property trust outside of your SMSF
- Find an investment property
- Pay a deposit from your SMSF and borrow the rest from a mortgage lender
- Sit back and relax as rental income from the property is paid into your SMSF
What are the Advantages?
- Greater investment choices for your SMSF
- Borrowing allows you to diversify yourportfolio
- Lower rate of capital gains tax payable, or potentially no capital gains tax payable (if the property is sold when you are over 60 and retired)
- Ability to leverage an asset
- Rental income generated does not count as a taxed contribution
- Non-recourse loan – the mortgage lender has no access to other assets in your SMSF in the event of a default
- Can be used for efficient estate planning
- Income generated from the property can help to pay off the property loan or be reinvested for further investments
- Interest expenses are able to be claimed as tax deductions
Don’t have a SMSF?
Freeman Fox provides a full SMSF establishment and administration service. Once you are set up your advisor will help to arrange your finance and purchase your investment property.
Already have a SMSF?
Speak to your Freeman Fox advisor about diversifying your portfolio through property investment.
Want to know more about property in you Super?
Call a Freeman Fox advisor on 1800 000 369 to discuss SMSF Borrowing today.
