SMSF or Self Managed Super Funds and Investment Property
Borrowing in your super to invest in property
Think about this, most people view superannuation as simply providing for retirement … it is far bigger than that, as your Super can form a major component of your Tax Structuring, your wealth creation, asset protection and of course your estate planning strategy.
Did you know that your Super is currently the lowest taxed vehicle in Australia, with income being taxed at no more than 15% and can be as low as Nil for members drawing a pension.
The low (or nil) tax rate makes an incredibly compelling case for maximising your super or Self Managed Super Fund, especially in light of now being able to borrow funds to leverage certain asset classes in your SMSF. This presents a wonderful planning opportunity to acquire capital growth assets, such as investment property within your SMSF through gearing.
Any borrowings made are weighed up against funds in your SMSF and not against any personal borrowings plus any recourse that the lender has against the fund is limited to rights relating to the asset acquired within your fund only.
Borrowing in super is not limited to borrowing form a bank, you may borrow from a related party such as a family trust or an individual. A recent ATO media release has proposed that a zero interest rate loan might be acceptable, keep an ear to the ground for further updates on this exciting ruling.
Tax rates are lower in the SMSF, thus income received from rent is taxed at a lower rate and you could be in a position to repay the loan at a faster rate due to less tax being paid on rental income. Maximum tax rate is 15% but could be lower if your SMSF receives a lower income.
Be aware that signing the contract using “and/or nominees” could lead to double stamp duties being paid. Ensure your SMSF is in place prior to finalising your investment.
Certain properties are more suited to your SMSF than others and we will gladly share which ones with you to ensure that you make an informed decision prior to finalising your decision. We also advise that you speak to your accountant (or we can comfortably refer you to one) to answer your technical or tax questions you may have.
Setting up your SMSF need not be costly and entering into agreements will attract fees, most clients understand that future tax savings within the SMSF during accumulation phase or at retirement will probably far exceed any upfront fees you are making to set up the SMSF and acquire property within.
properT networker are property specialists and are set up to source a selection of ‘best fit’ investment properties on your behalf saving you time, stress and money in trying to do this yourself. We carry intellectual knowledge that we will gladly share with you to ensure that you make an informed decision at all times and look forward to working with you ensuring that you reach your goals and investment objectives effectively.
Author : Stephen Lazar is a Director of properT networker
Investment Property Melbourne suited to self managed super funds
Investment Property Queensland suited to self managed super funds
Comments or questions are welcome.