Is It a Good Idea to Buy a Property With SMSF

Lately, people have been interested in investing in property via SMSF, and the demand has been increasing throughout the years. Direct property purchase is possible with self-managed super funds, and there are several rules if you desire to buy a property with this fund.

Firstly, the SMSF property shouldn’t be acquired from a member’s relative. Similarly, you should abide by rules when purchasing the property, and there are various perks to tagging along with the process.

Continue reading to know more about the advantages of a property purchase with SMSF funds.

Tax Benefits

When investing in real estate via self-managed super, tax savings are higher. Hence, save money, from SMSF loan interest to insurance and maintenance costs. And if necessary, you can hire a tax accountant with experience in SMSF lending, and they will help you notice the claimable tax deductions. The experts will ensure you receive the best tax return without any hindrance.

Fewer Capital Gains Tax

CGT is usually levied when you make profits by selling assets. It also includes the property you owned for a year. As per the Australian Taxation Office, income tax returns also include CGT. The CGT is around ten per cent when purchasing a property or when you make a real estate purchase. You will complete CGT exemptions when converting the funds into pensions, and you can save hundreds or thousands of dollars.

Elevate Your Retirement Savings

Buying SMSF property will help increase retirement savings swiftly as the income and property’s capital growth goes directly into your SMSF. The superannuation balance is increased in the long run, and you will have direct control of your investments.

Have Better Control of Your Assets

This is one of the best benefits of buying an investment property with the super fund. Due to its tangibility, real estate assures better control than other investment products. As such, you may earn a better income and enhance capital growth potential effortlessly. And unlike other assets, there is no need to worry about their assets. Also, portfolio diversification is easier for individuals with funds.

Leverage Assets

You are capable of leveraging assets when there is an SMSF property. It will be easier to borrow or fund a new property by utilising capital growth and rental income.

In a nutshell, control, portfolio diversification, swift debt reductions, and tax savings are the perks of buying real estate through SMSF. However, there are some strict rules that individuals should consider. These rules are complex, but the members’ financial future is protected cautiously. So, a potential property will undergo the “sole purpose test, ” implying that it exclusively offers retirement benefits for fund members.

Meanwhile, you can’t buy overseas property, a holiday house, an acquaintance’s property or a building under redevelopment. Commercial building purchase is acceptable, but you must lease it via your business.

Purchase With a Self-Managed Super Fund

SMSF lending is the best choice if you plan to invest retirement savings in real estate. However, you should comply with the rules for buying the best property and ensure you meet the conditions specified above. Individuals are well aware that there will be a significant increase in the property’s investment. Also, there is no need to pay higher CGT and accelerating your savings development will be effortless.

You don’t need any minimum balance in the SMSF to purchase a property, but specialists suggest having a minimum of $200,000 in the account. Though it is hard to evaluate the necessary cash, you can always stay on the safer side with a minimum deposit that covers initial charges and operating costs. And when purchasing a residential building, it is crucial to have at least one-fourth of the property value.


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