Pay Less in Taxes and Give A Boost Your Retirement Savings – Buy Property Through Your Self Managed Superannuation Fund

Saving for your retirement is one of the smartest things that you can do for yourself. Taking advantage of a superannuation fund through your employer is a fantastic way to do this, but are you getting all you can out of your super? In 2008, government approved the ability to purchase investment property through self-managed super funds, which can dramatically improve the balance in your portfolio.

The benefits of an SMSF (self-managed superannuation fund) owning investment property rather than you owning it individually include:

• No capital gains tax after age 55 in TTR (transitioning to retirement) or 10% before age 55
• Fund your property and ongoing costs from rental income and employer SG 9% contributions rather than your pocket
• Advice and accounting fees are tax deductible
• Property investments don’t count toward your concessional contribution caps
• Protect your assets – avoid creditors
• Rental income is taxed at 15% rather than 37%
• Interest deduction on any loans you obtain to aid in the property purchase
• Use your super to pay stamp duty
• Pay down your property loan more quickly using SG contribution and salary-sacrificed money taxed at 15% rather than 37%
• Keep your current cash flow and lifestyle since all fees are paid through your super
• No stamp duty on property purchased entirely with your super
• Business owners pay no stamp duty when buying a commercial property in Victoria – in NSW stamps are $50 and in WA it’s $20 – a significant savings over properties purchased outside a SMSF

Many individuals have lost money through their traditional retail super fund due to the volatility in the markets. Portfolios which have real property in the mix can offer more stability than those without.

Assets which can be part of a self-managed super include:

• Business real property

• Residential investment property

• Unlisted funds (Property/Shares)

• Listed shares

In general, couples or individuals who will soon be retiring (aged 50 to 60 years) should seek out income growth properties rather than capital growth opportunities, whereas couples or persons in an acquisition period (aged 20 to 48) should be seeking out capital growth opportunities to help them build up their portfolio.

The example below of a couple, aged 48, illustrates how buying property in an SMSF can be a superb boost for your retirement fund.

There are really no off-limit properties, however it’s advisable to assess your current financial situation and your investment goals before buying property with your SMSF. It’s also a very good idea to contact a professional who is versed in buying property through a super for your best chance at a building a strong retirement portfolio.

Clients who are interested in using their super to buy investment properties now have a fantastic resource, as we’ve teamed up with a professional who can help you get started. Robert Joseph, Financial Adviser with Freedom Wealth can assess your current financial situation and advise you of the options available to you. Attend a Property Investor Night to get the ball rolling and find out more.