Every year we find many of our clients are taking control of their superannuation by establishing a Self-Managed Super Fund and it is becoming increasingly popular to purchase property within that SMSF. More than 36,000 SMSFs are being established in Australia each year with the intention of gaining better control of investment decisions that will determine retirement benefits.

Buying property within your SMSF

  1. It’s important to mention that if you have an SMSF, it does take a considerable amount of work, time and money to achieve this independence to manage your own superannuation. After all, you control all the investment decisions and take all the responsibility.
  1. Having said that, because you are a savvy SMSF trustee you would have a support group of professionals to make sure all legislative requirements are met. Some of the experienced professionals that may assist you in managing your fund are:
  • Financial planner
  • Accountant
  • Mortgage Broker
  • Solicitor
  • Real Estate Agent

Some people also have an SMSF administrator to assist in their Self-Managed Super Fund.

  1. You can easily see how complicated it could get managing your own super. It’s important that its worth your while; if you have a low amount of superannuation investments it can be expensive to run your SMSF; however, if you have a high balance it can be cheaper to run an SMSF and very tax effective.
  1. You can nominate as many as 4 trustees to your SMSF and generally they are made up of couples and family members; although SMSFs can have unrelated members and may simply be people with similar investment objectives and needs.
  1. There are a few important rules if you want to buy property through your SMSF. The SMSF must meet the ‘sole purpose test’, this means that any investment must solely provide retirement benefits to the fund members. If you are buying a house through your SMSF you or your family, or any fund members’ related parties cannot live or rent the property. You can also not acquire the property through a related party or member.
  1. Although your SMSF cannot buy your residential property it can buy your business premises if it meets the sole purpose test. If you choose to purchase your business premises through your SMSF you must acquire it at market value and it also must be wholly used for business. Tenancy agreements are also to be based on current market prices and practices.
  1. Consideration must be given as to what sort of property you purchase, as the rules as to what you are permitted to do and buy within your SMSF have severe penalties for those who do not comply.

If your goal is to create wealth through an investment strategy that will achieve your objectives and provide diversification across asset classes, an SMSF may be the optimal solution to taking control of your retirement benefits.

If you would like to take advantage of the benefits of purchasing property through your SMSF and save on tax while your investment benefits from capital growth as well as a rental return, let’s discuss a strategy that is best for your personal circumstances. Our financial planners and experienced SMSF mortgage brokers are a phone call away (03) 5976 8426.