Have you recently heard about the possibility of purchasing a property through your super?
Please see some general facts below, and please note that all the information provided is of general nature and in no way or form is advice or a recommendation for you to purchase a property through your super. Please consult a financial planner to determine if this is the right strategy for you.
Buying a property in your superfund is a strategy that can be used to fund your retirement.
However, investing into property inside super is not as straightforward as purchasing it in your own name.
The following rules need to be followed:
• Must meet the ‘sole purpose test’ of solely providing retirement benefits to fund members
• Must not be acquired from a related party of a member
• Must not be lived in by a fund member or any fund members’ related parties
• Must not be rented by a fund member or any fund members’ related parties.
Potential Benefits
• Investing into bricks & mortar- Many investors look to invest into tangible assets and want control of their investment
• Supporting your business- As noted above, the rules prevent you from living in the property, however the property can be leased to your business at a market rental rate.
• Combined investing- There is an option of pooling Super balances of your family members to meet the deposit requirements of a property and also looking at purchasing a larger value asset
Potential risks
• Not as liquid- Unlike shares that can be potentially sold and settled within 3 days, it could take days/ months to sell and settle on a property
• Not great for negative gearing- Any losses can only be claimed at the Super tax bracket- Concessional contributions are taxed @ 15%
• You cannot personally benefit from the property- As noted above one of the tests above, the transaction must be strictly on a commercial basis.
Disclaimer: Please note that the above is a general article and it does not constitute any financial or tax advice. Your full financial situation would need to be reviewed prior to acceptance of any offer or product. Self-managed super funds are a highly regulated product and you will need to consult an Accountant or a financial planner to ensure that this is the right mode of investment for you.
