Good old bricks and mortar have always appealed to the Australian investor as a trusted property investment strategy. But as we continue to face an uncertain world economy, now more than ever investors are turning to property investment through their self-managed super funds. Is this the right strategy for you?
What It’ll Cost You
Generally, the purchase of a property with your self-managed super fund (SMSF) takes place in a conventional way. However your SMSF must satisfy the loan requirements of your lender, and in most cases the maximum loan-to-value ratio is around 65-70 per cent of the property value.
As with any normal investment property purchase, all associated purchasing and property costs are paid for by the SMSF. And since the property is ‘beneficially owned’ by the SMSF, it collects all rental proceeds and income.
Tax Benefits
There are major tax concessions available to SMSF-funded property investors. By holding a property in super, rental income attracts only 15 per cent tax (or no tax at all during the pension phase). And if the investor chooses to sell the property after their super switches to the pension phase, no capital gains tax will be payable.
What to Watch Out For
Despite the tax benefit draw card, property investment with an SMSF has its pitfalls, so proceed with caution. Investors must have their trust set up correctly, and there can be complicated issues surrounding the loan structure and compliance with trust and tax guidelines.
If you’d like to learn more about investing in property with your super, Silverhall runs FREE informative investment property seminars in Sydney. Or simply arrange a FREE one-on-one appointment at a suitable time and location of your choice. Find out more by visiting their website or contact 1300 662 143.