Property in your SMSF


One of the main reasons Self-Managed Superannuation Funds (SMSFs) are so popular among Australians is that they provide greater choice and flexibility to members for investing their retirement savings.

SMSF investment options include shares, bonds, managed funds, and even residential and commercial property. However before you get too excited with all of the real estate advertising targeting property ownership through SMSFs, every investment in your SMSF must satisfy stringent rules, in particular the ‘sole purpose test’. This means that you can’t use the property for personal use, or rent it out to friends or family at reduced rates. It must be a legitimate investment.

Tax treatment

A major benefit of putting a property in your SMSF is the associated tax advantages, particularly if your investment is positively geared.

When you hold an investment property within your SMSF, you will only pay 15% tax on rental income earned. Compare this to holding it in your own name and paying tax at your marginal tax rate, which can be as high as 46.5%. And once you reach age 60, if you receive an account based pension, you may not have to pay any tax on income earned from the property.

In addition, if your SMSF holds the property for more than 12 months, capital gains made on the sale of that property are taxed at a maximum rate of just 10%, or nil if you are receiving a pension from the fund.

Gearing into an investment property can provide further tax benefits. You can use a portion of your fund balance to pay the deposit and then make regular loan repayments from salary sacrifice super contributions that reduce your taxable income.

There are numerous rules governing Self-Managed Super Funds to protect the future of fund members. If this sounds like a good option for your retirement investment, always seek qualified advice in this specialised area before acting.

What if I own my property within my SMSF outright?

There are hidden opportunities for those savvy investors with a property owned outright in their SMSF.

Have you sought a depreciation schedule for your property to maximise your capital works deductions and depreciation of plant and equipment assets?

Depreciation is an excellent way to reduce a SMSF’s tax liability for a brand new property as it experiences wear and tear over time. We recommend obtaining a depreciation schedule for any property held for investment purposes, but especially one held in an SMSF so that the property depreciation deductions can be documented and claimed.

BMT Tax Depreciation who have a offices both locally and interstate, can prepare a comprehensive schedule for any property To make an enquiry simply visit or call 1300 728 726. 

How to add diversification and consider the long term minimum pension requirements?

Diversification into a wider portfolio including shares with franking credits may provide income with tax offsets that can assist with the positive rental returns being generated.

We provide a range of tailored advice solutions where investments can complement any directly held investments like property with other diversified investments to achieve a level of liquidity that direct property can’t achieve on its own, and to offer flexibility into retirement with being able to draw down for pension payments, when a property may have grown to be worth a significant value and the minimum pension requirements may not be met through the rent payments alone.

We love talking strategy, and bringing an idea into terms that are meaningful for you. Book a no obligation appointment today to see if your ideas can transfer into a great future. 0249411888.