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How to invest in property with your superannuation

By Dominique Merriman

With the right research and risk-management most have positive success flipping properties for a quick return, however property is generally best tackled as a slow and steady investment option, with property prices in most city and regional centres across Australia experiencing consistent growth over time.

If you’ve got a healthy balance in your superannuation fund, exploring ways to use your super to invest in property is a smart option that a growing number of keen property investors are pursuing to help build wealth for a secure financial future.

Set Up a Self-Managed Super Fund

If you don’t already have a self-managed super fund (SMSF), talk to your financial adviser or accountant to see if it’s right for your circumstances.

Ask your accountant to explain the portability rules and how they work in relation to your individual situation.

By establishing an SMSF, you can maximise your super in a range of ways, including saving fees, and by buying property within your SMSF, you can also minimise tax liability. Getting advice from an accountant or adviser who has proven experience helping clients purchase property within the SMSF structure is critical to ensure you have all the right knowledge.

Learn How to Reduce Your Tax Obligations

One key benefit of investing in property through your SMSF is to do with tax concessions, with a 15% tax rate on superannuation investments that compares favourably to the typically higher rate of personal tax rates.

Investing in property delivers other benefits too, with the ability to provide potential sources of revenue that could help boost your retirement savings.

With income generated from your SMSF-purchased property, you can then find other investment purchases, plus you can benefit from tax breaks if your property is negatively geared. Rental income from your investment property that is paid to your SMSF is also only taxed at 15%, and in certain circumstances, this can be reduced to 0%.

Understand the Rules of Investing with Super

Just like other investments made with superannuation, there are some rules to adhere to. Your SMSF can’t be used to purchase or pay off your home or holiday home, the properties you invest in must be used to save for your retirement. There are also exclusions on trustees of the SMSF (or their relatives) when it comes to occupying SMSF-purchased properties.

You also cannot buy a property through your SMSF that is already owned by you, a friend, or a relative. That rule doesn’t apply to commercial properties which can, generally, be bought and occupied by an SMSF trustee, or family member providing the market rate for rent is being paid.

Be Aware of The Complexities

Don’t have quite enough in your superfund to purchase the property you have your eye on? SMSF-property investment purchases only give you access to limited recourse loans. This means that getting a lender to help you buy property through your SMSF can be more difficult but with an experienced mortgage broker on your side, you can find the best possible solution to help you fulfil your dreams of being a landlord.

Whichever way you purchase an investment, becoming a property investor can be a positive endeavor and with an investment property portfolio and a professional property management team looking after it for you, you could be on your way to a comfortable retirement.

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