
Self Managed Superannuation Funds (SMSFs) can now borrow money to purchase real estate. An investor can have just as much choice and control over investment properties purchased within a SMSF as outside a SMSF. Until recently, this had not been possible because of restrictions on Superannuation funds borrowing and using their assets as security. The Superannuation Industry Supervision Act (SIS ACT) was amended in September 2007 to allow SMSFs to borrow money so long as a special structure is used. Many Australians have significant money in Superannuation, and more and more are establishing their own Self Managed Super Funds. This means you may now be able to include real estate in your Super Funds investment portfolio. Dont have a SMSF? Thats ok, talk to Prowealth Accounting about the reasons why a SMSF could be to your advantage.
1. Its a physical asset you can see. You can drive past your investment property and actually see your super working for you. Do you know where your Super is right now?.
2. You dont need the full purchase price in your fund, only enough for a deposit. Generally, youll need at least a 30% deposit plus purchase costs.
3. Pay no tax with a SMSF. Until youre 60, youre taxed at only 15% on income (versus up to 45% in your own name) and only pay 10% Capital Gains Tax. When youre over 60, you pay NO tax on income and NO Capital Gains Tax.
4. You have absolute control; You can decide what your Super will be invested in. This means you can have some in property, some in shares etc its up to you. If you choose property as part of your strategy, you can see and touch it!
5. Your employer helps pay for the property. By law, employers put 9% of your salary into Super. You may want to have those contributions go to your SMSF to pay off the property!
6. You can combine Super balances. A SMSF allows you to pool the balance of your fund with your spouse, parents, children or other family members. SMSFs can have up to 4 family members, which means that between a few of you, you may have enough for a deposit on a property.
7. Its not as hard as some would have you think. Whilst its true that SMSFs have much compliance to be aware of, the fact is that your accountant or planner will do the majority of this for you. So as long as you act in the best interest of the members, you should be fine.