Buying property with Super Funds, or SMSFs, is becoming more and more common. In 2007, SMSFs were granted the ability to borrow money for the purpose of investing in real estate. The number of investors who have taken advantage of this opportunity has grown steadily. Recent Australian Taxation Office statistics show that over 516,000 have already invested. With nearly 1 million SMSF trustees in Australia, it’s easy to see why buying property with Super Funds has become so popular.
The Benefits of Buying Property with Super
There are a few reasons why some trustees choose to invest in real estate. They include:
- Lower Rental Home Concessional Taxes
If you own investment property, the tax rates may be based on your personal rate which may be as much as 46.5%. When a property is held by a company, then the tax rate will be 30%. And all rent funds received by the SMSF are taxed at a rate of no more than 15%. The rate may be less based on any ownership-related expenses incurred.
- Lower Capital Gains Tax When You Sell
If the property’s value goes up, that could mean that capital gains taxes will also go up. If your property is held by your SMSF, then different tax rates will apply. In some cases, should you choose to sell the property, you may have to pay no taxes.
- Increased Superannuation Savings
If your SMSF owns the property that houses your business, the business may be required to pay commercial rental fees. This is paid to the SMSF, so your superannuation savings grow even faster. The rent paid by your business is tax deductible for added savings.
- Assets Protected From Bankruptcy
Assets held by your SMSF are not accessible to creditors should you file bankruptcy. This can provide some protection should you fall on hard times. No one wants to face something like bankruptcy, but at least you know some of your assets are protected if it should happen.
How to Buy Property with an SMSF
So how does buying property with Super Funds work? If the fund has enough money available, the property can be purchased outright. If funds need to be borrowed, the SMSF can do so however will be subject to different rules than those that apply to individuals. If you already own property, you can transfer or sell it to the SMSF as long as it’s considered business real property, which is property used exclusively in a business.
To learn more about buying property with a Super, contact Catrina at Seajay Mortgage Brokers today to discuss your investment options.