A Self Managed Super Fund (SMSF) is the only way you can use your superannuation benefits to directly purchase property. It’s a popular strategy for a reason, so let’s take a quick look at the benefits of buying property through an SMSF.
1. Investment Diversification
Including property in your SMSF investment portfolio can help diversify risk. Property can perform differently from traditional investment assets like stocks and bonds, which can provide a level of stability during market fluctuations.
2. Control and Flexibility
With an SMSF, you have greater control over your investment decisions. You can choose the specific property, location, and even the property management strategies that align with your investment goals.
3. Tax Advantages
SMSFs enjoy certain tax benefits. Rental income received from the property is generally taxed at a concessional rate of 15%, and if the property is sold after the fund enters the pension phase, any capital gains may be tax-free.
4. Leverage
SMSFs can borrow money to invest in property through a Limited Recourse Borrowing Arrangement (LRBA). This allows the SMSF to invest in higher-value properties without needing the entire purchase amount upfront.
5. Rental Income for Retirement
Rental income generated from the property can contribute to your retirement income. This can be particularly valuable when combined with other income streams, such as a pension or other investments.
6. Long Term Capital Growth Potential
Historically, property has shown the potential for long-term capital appreciation. This could contribute to the growth of your SMSF's assets over time. Property is also a long-term investment, aligning well with the retirement goals of an SMSF.
7. Asset Protection
Assets held within an SMSF generally enjoy a level of protection from creditors in the event of bankruptcy or financial difficulty, which can provide added security.
8. Estate Planning
Owning property through an SMSF can provide more structured estate planning options. You can specify how the property's ownership will be passed on to beneficiaries upon your passing.
9. Reduced Costs
Some costs associated with property investment, such as property management and maintenance expenses, may be deductible within the SMSF.
10. Ownership Control
Property ownership through an SMSF allows you to have a tangible asset that you can use for business purposes (subject to specific SMSF regulations).
A Commercial Property and SMSF Success Story
Jess Nardella, Director of high-end construction company DuoBuilt, came to BlueRock for guidance after a friend's suggestion to use super funds for purchasing commercial property to lease back to his business. Unsure of the process and whether an SMSF was suitable, he consulted our private wealth advisors . Assessing his strong business position and substantial super balance, they determined that Jess was well-suited for the strategy.
With BlueRock’s help, Jess set up an SMSF and acquired a commercial property through the SMSF, which he then leased to his business. This move allowed him to leverage his SMSF's accumulated capital, securing long-term business premises through borrowing. With this approach, Jess now advances his SMSF's growth by leasing to his own company. BlueRock's comprehensive services and holistic approach streamlined Jess's journey; covering SMSF advice, loan setup, property conveyancing , and leasing.
Seek Professional SMSF Advice
There are significant advantages to using an SMSF to invest in property, but they come with regulatory and compliance requirements you need to navigate carefully. Seek professional advice from BlueRock’s financial advisors, accountants, and legal experts with expertise in SMSFs before you make any big decisions.
Download our free guide on investing in property with your SMSF to understand the strategies and know the rules involved.
Disclaimer: The information in this document is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. This information has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information before acting or seek advice before making any financial decisions.
