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Buying investment property through your Self-Managed Super Fund (part 1)

30 Sep 2013 murraybridge 0 Comment

These days it’s becoming increasingly common to see properties advertised as “perfect for your super fund” – or “do it for your super fund”… have you ever wondered what this means?

Superannuation legislation allows Self-Managed Superannuation Funds (SMSF) to borrow to invest in residential or commercial property.

Investing through your SMSF may be a tax effective way for you to create wealth for your future, and diversify your super investment portfolio. Income from the SMSF, including capital gains, are taxed at concessional rates, so you should end up saving more money for your retirement.

There are a number of advantages to holding property inside an SMSF, as opposed to owning it in your own name.

1.  Concessional tax on rental income: Due to the concessional tax rate that applies to superannuation investment earnings, rent received by your SMSF will be taxed at a maximum rate of 15% (not your personal tax rate which might be 46.5%, or the company tax rate of 30%).

2.  Concessional tax on future capital gains: Special superannuation tax rates also apply to any capital gain made as a result of an increase in the property’s value. As a result, depending on when you decide to sell the property, any capital gain your fund makes on the sale of the property may be completely tax-free.

3.  Increased superannuation opportunities: In addition to the above, where the property owned by your SMSF is the property from which you run your own business, superannuation rules require your business to pay a commercial rate of rent to the fund – providing you with a way to accelerate your superannuation savings.

4.  Other benefits: Depending on your personal circumstances, there could also be other benefits from holding property within your SMSF. For example, superannuation assets are generally protected from creditors in bankruptcy situations.

There is much more information about Self Managed Super Funds at the Self Managed Super Fund Institute: http://www.smsfinstitute.com.au/smsf-buying-property.php

Your Professionals Property Consultant will have further information about buying property through your Super Fund. Please feel free to ask us at any time.

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