Self Managed Super Funds have more investment options than other types of funds and a major point of difference is their ability to invest in property. Here are some reasons investing in property with your SMSF can be a good idea:
Having an investment property in super is makes sense as real property has the potential of strong and stable capital growth. Property returns, as an asset class, are unrelated to other types of investment and are a good way of balancing your super investments. This is because they usually don’t experience the volatility that can occur with other investments. This simply means you won’t have all your eggs in one basket in case the market for other types of investments takes a downward turn.
Take Advantage of Ability to borrow
Property generally requires a significant investment. However, if you don’t have enough in your super, your SMSF is now permitted to borrow under certain circumstances. Gearing using a limited recourse borrowing arrangement is becoming increasingly popular in SMSFs. And there are several strategies you can use to take advantage of the ability to borrow. (See How to Borrow With a SMSF)
The tax advantages of salary sacrificing into super mean that you can reduce your income tax so that debt can be paid more quickly. If you sell a property from your SMSF in retirement phase, you generally won’t have to pay any capital gains tax.
Carol is a Senior Accountant at Insight Accounting advice. She is a registered tax agent, has a Bachelor of Commerce and Advanced Diploma in Accounting. Carol’s areas of expertise include tax and property advice.
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.