Property investing with a Self-Managed Super Fund is now one of the smartest and most tax-effective ways you can boost your super returns, while buying investment property
If you have a combined family super value of around $150,000 or more and want to use the powerful leverage of property to boost your retirement savings, then the option of borrowing to buy property in a self managed super fund, is a ‘no brainer’
Here are some reasons why you should buy property in a self managed super fund:
- You can take control of your Super and choose your own investments, such as commercial and residential properties, anywhere in Australia, rather than let fund managers control your money, and your future
- Borrowing to invest in property can help your SMSF maintain an appropriate level of diversification within your fund
- Unlike all other super funds, SMSF’s have the ability to borrow to invest
- Take advantage of compound growth on a much larger super balance, without the need to contribute any of your own money
- You can repay the debt significantly faster inside your super because of concessional tax advantages
- Wipe out any super income tax and compulsory contributions taxes being lost on each super contribution – i.e. employer, salary sacrifice and personal tax deductible contributions
- Excellent tax advantages, SMSF’s maximum tax rate is 15%, which drops to 0% in pension phase. That means you pay no capital gains tax or income tax on rental income generated.
- Investment loans taken out for borrowing in an SMSF are non-recourse, which means the banks take on all the risk, not you
- Buying Property via your SMSF is an excellent form of Asset Protection, as you don’t own the asset, your Super Fund does
- Use your SMSF to provide you with a range of personal insurances, eg. Income Protection
Here’s a basic example of how it works
Let’s say you had $150 000 in your families Self Managed Super Fund. You can use the money in your super as a deposit plus costs to buy a property and the bank will lend you the rest.
So if you wanted to buy a property worth $500,000, you could put in $125,000 which equals 30% plus costs, and the bank will lend you $375,000 to complete the purchase.
This means that you super balance would have increased from $150,000 to $500,000. So in this scenario, if both assets grew at a similar rate, the larger value asset would exponentially increase your return on investment.
Compounding over the rest of your working life, this could end up being a hugely significant difference to your super balance, and provide you with better security and lifestyle options for your retirement.
Your loan repayments will be repaid by the tenant in rent, plus your personal, employer or tax deductible super contributions.
This demonstrates that by substantially increasing the value of your fund, it significantly increases the potential for return on your investment.
- Find the best properties to buy in your SMSF
- Generate a constant stream of rental income and substantial capital growth
- Diversify your portfolio and provide a defense against market fluctuations
- Significantly reduce your income taxes on rental income and capital gains
- Deduct 100% of your real estate interest repayments and ongoing costs such as repairs, insurance, agents’ fees and depreciation against your fund’s taxable income
- Structure your SMSF to ensure you can meet your interest obligations even if you stop making contributions to super
- Ensure you don’t make costly mistakes that can cost your fund hundreds of thousands of dollars in penalty taxes
There’s never been a better time to invest in property using an SMSF.
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