One of the big new trends in our marketplace today is the increasing number of investors buying property with their self managed super funds (SMSFs).
Back in 2007, the super rules changed to allow people to borrow through their super funds for investment. It's taken a while for people to get used to the idea of running their own super fund, let alone borrowing through it to buy a property. However, with more and more people setting up their own super funds today, we're seeing a significant flow-on effect in the property market.
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Latest figures from the Australian Tax office show a 50 per cent increase in property investment via SMSFs and a 13 per cent jump in the past year alone.
Just like the First Home Owners' Grant prompted more first homebuyers to get into the property market, more people are taking advantage of the opportunity to borrow up to 70 per cent of a property's value through their SMSF to buy an investment.
Australia's largest mortgage broker, AFG reports that for every first homebuyer that takes out a new mortgage in Australia, there are three property investors doing the same right now.
SMSF property investing is becoming more popular because there are very strong rental returns available, the costs have dropped and quite simply, more people are realising the benefits. A lot of people ignored the opportunity before because running your own super fund sounds pretty daunting and the structures used to buy property through your super are pretty complicated.
On paper, buying property with your super sounds like a great idea and there are definitely many benefits. But there are also many rules and regulations so it's recommended that you get some independent advice.
On paper, buying property with your super sounds like a great idea and there are definitely many benefits
If you buy a property with your super fund and hold the property until after you retire and your super goes into the pension phase, you pay no tax on either the 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 per cent (if you hold the property for more than a year, this drops to 10 per cent on capital gains).
Direct control of your super investments and a real understanding of where your money is invested is a definite must to ensure you are making your money work for you.
The team at DPN can refer you to the appropriate professionals to assist you to establish your SMSF. Then, DPN can assist you with your property investment decisions and help you to find the best properties to suit your situation. You can contact us at any time by completing the form above for a free property investment plan.