Using property for superannuation is nothing new. The big change is legislation that now allows consumers to borrow money for SMSF investments, subsequently providing more people with the opportunity to use property investment as key way to fund their retirement.
There are some strict rules and extensive reporting that come with such investments and the ATO can enforce harsh penalties for non-compliance. For example, the property cannot be used as a holiday house, and while there is some opportunity for business owners to use the property for business purposes, the rental income must be at market value.
In addition, the finance structure for a SMSF property investment is different, often with lenders requiring higher deposit amounts of up to 30%.
There are advantages for SMSF property investments, including tax benefits such as a flat 15% tax on rental income, a reduction on capital gains tax after 12 months and deductions on personal and salary sacrifice super contributions. Any rental income the fund receives can be used by your SMSF to help cover the loan repayments.
Importantly, setting up an SMSF comes with fees (approximately $2,000) and ongoing professional management. Like any investment, it’s important to have a strategy, do your research and talk to your Accountant or Financial Planner to make sure it’s the right option for you
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