The decision to acquire property through your SMSF must be carefully considered. Purchasing a SMSF property is becoming increasingly popular, ensure you weigh up all the benefits and disadvantages prior to making your decision.
SMSF Property Benefits
Some of the benefits of including this aspect within your self-managed super fund are;
- Tax savings – If you buy a SMSF property and hold it until after you retire and your super goes into the pension phase, you pay no tax on either capital gains if you sell or the rent if you continue to hold your investment. Before retirement, capital gains and rent earned by your SMSF are taxed at only 15%. If you hold the property for more than a year, this drops to 10 percent on capital gains.
- Control – direct control of your super investments and a real understanding of where your money is invested.
- Diversification in your SMSF portfolio.
- Commercial property can be leased to trustees and related parties at market value rent.
Some of the disadvantages of having property within your self-managed super fund are;
- Residential property cannot have trustees or the related parties of the trustees live in the property even if they pay market rent.
- You cannot make improvements to the structure while it is still under a loan.
- There are higher fees involved in purchasing this type with a SMSF borrowing arrangement.
- Non-compliance with regulatory restrictions imposed on SMSF buildings can lead to penalties and other serious legal consequences.
If you have any questions, please contact SuperHelp on 1300 736 453.
This information should not be considered personal financial advice as it is intended to provide general advice only. The article has been prepared by Superhelp Australia Pty Ltd without taking into account your personal objectives, financial situations or needs.
The information contained in the article may not be appropriate to your individual needs therefore you should seek personal financial advice before making any financial or investment decisions.