Property ownership doesn't have to be out of reach
Looking to own a property but don’t quite have the liquid funds? A Self Managed Superannuation Fund (SMSF) could be your golden ticket.
SMSFs provide a unique opportunity to take control of your superannuation and diversify your retirement portfolio by allowing you to invest in property using your super, and even borrow funds for property investment.
Borrowing through your SMSF may seem straightforward, but it comes with a host of complexities such as annual audits, property valuations, Limited Recourse Borrowing Arrangements (LRBA), and additional advice for things like related-party purchasing. These must all be carefully and expertly navigated to avoid costly mistakes.
The regulations that govern property ownership within an SMSF are stringent. Failure to follow the rules can lead to severe consequences, including significant tax penalties and potential disqualification of your fund. It’s crucial to work with a team that have a comprehensive understanding of every aspect of the process.
At BIS Super, we guide you through this complex process in its entirety, ensuring that your SMSF is fully compliant with all relevant regulations. With over 40 years of combined experience, our Specialist SMSF Advisers’ #1 priority is safeguarding not just your investments, but your broader financial future.
The Benefits of Buying Property Through Your SMSF
✓ Tax effective strategy, with the potential for capital gains tax savings (CGT)
SMSFs enjoy concessional tax rates, and when structured correctly, the capital gains tax (CGT) on properties held by an SMSF can be significantly lower than if owned personally.
If the property is held for more than 12 months, the SMSF may qualify for a one-third CGT discount. Additionally, if the property is sold in the pension phase, there may be no CGT at all.
✓ Great way to enter the property market with little personal funds
Purchasing property through your SMSF can be an excellent way to enter the property market, especially if you lack the personal funds to do so, giving you the opportunity to secure a property that would otherwise be out of reach.
By leveraging your superannuation to achieve property ownership, you turn retirement savings into a tangible asset with growth potential.
✓ A great wealth creation tool for business owners
Business owners have the potential to purchase their business premises through their SMSF. In such cases, the SMSF acts as the landlord, providing a steady income stream for the fund and helping to build wealth over time.
By owning the premises through their SMSF, business owners can convert rent payments into super contributions, ensuring that their business expenses directly contribute to their retirement savings.
✓ Diversification outside of share and fixed-interest investments
Most superfunds are heavily weighted towards shares and fixed-interest investments. Diversifying with property lets you reduce exposure to market volatility and create a more balanced investment portfolio.
Diversification also offers greater security against market downturns during times of economic uncertainty, particularly since property values often move independently of the stock market.
Can I Borrow Through My SMSF?
Not quite enough cash to fund your SMSF property purchase?
If your SMSF lacks sufficient funds to cover the full cost of a property purchase, you may be able to borrow. SMSFs can obtain loans from banks, or sometimes related parties, to finance property purchases.
Borrowing within an SMSF is a complex process that involves a specific type of loan known as a Limited Recourse Borrowing Arrangement (LRBA), which comes with its own set of rules, requirements and regulations. Failure to comply can result in significant penalties and complications, which is why it is crucial to seek specialist advice.
At BIS Super, our expert advisers have extensive experience in helping our clients navigate the intricacies of holding property and borrowing within their SMSF. Our accurate and reliable guidance ensures that your SMSF borrowing strategy is effective, sound and compliant.
NOTE: Our advice is entirely 100% independent. We will never promote specific properties or suggest particular areas or suburbs for investment. Our role is to work with you to implement your borrowing strategy correctly, ensuring that your SMSF remains compliant and your goals are achieved.
