Since 2007 individuals have considered buying an investment property in their superannuation fund for a number of reasons including,
- They feel that the purchase of an investment property is a good, sound, long term investment.
- Purchasing an investment property allows them to get the financial benefits of gearing. For example, if their superannuation account has a balance of say $150,000 they may use this as the deposit and borrow say $400,000 from the bank to buy an investment property for $550,000 in their Self-Managed Superannuation Fund (SMSF). This strategy means that they get growth on their $550,000 property rather than a return on only $150,000.
- They feel they have too much of their superannuation invested in shares or managed funds.
- They prefer to select their own investment property rather than invest in a listed or unlisted property trust.
- They can use their 9.5% statutory superannuation contribution from their employer to meet the cost of the maintenance of the property and/or reduce the debt on that property loan.
- They are able to minimise the capital gains tax implications when they sell the property as the maximum capital gains tax rate will be 10%. The capital gains tax may be zero if sold after they retire.
- They can pay down the balance of the loan on the property with before tax earnings i.e. superannuation contributions up to $25,000, rather than their individual savings.
The above highlights some of the reasons people choose this strategy.
Should you require further information on purchasing property in your Self-Managed Superannuation Fund, please feel free to contact Peter Quinn on +61 2 9580 9166.
