SMSF and Property – What Investors Need to Know

There are numerous ways to buy an investment property and one such way is through your Self Managed Super Fund (SMSF).

Instead of saving up a 10% deposit for your next investment property, which can realistically take you a few years at least if you have no savings available, you might want to consider buying an investment property through your SMSF instead.

Buying a property through your SMSF allows you to choose exactly how you want your retirement savings to be utilised and grow rather than relying on a company to choose how your money is saved for you through a standard super account.

However, before you think of opening a SMSF account, there are a number of things you need to consider. Firstly, the most important consideration is whether you have enough money already saved up in your super account. There’s no point in going down the SMSF path if you have under $100,000 in your super account. This will not be a worthwhile venture for you and will end up costing you more.

You also need to consider whether you have the time to manage your super fund yourself and if you are happy to have this responsibility on your shoulders.

To give you a better understanding as to how you can use a self managed super fund to your advantage when buying property, our Senior Property Consultant Alex Goldhagen has put together a short video on SMSF and Property.

In this short video, Alex outlines the four major benefits of using a SMSF structure to buy property and he also talks about how you can make your money work harder for you. This video is based on his own experience of purchasing his first property through his SMSF account and provides some helpful tips and guidance for anyone looking to do the same.

Watch the video “SMSF and Property” now to learn some essential information on why buying property through your SMSF can be beneficial for you.

Key highlights from the video include:

SMSF and Property

Once you fully understand how the SMSF Structure works, this will allow you save hundreds of thousands of dollars over the long term.


SMSF Benefits

There are many benefits of using the SMSF structure when it comes to buying property, but the four major benefits include:

  1. Asset Protection
  2. Minimising Capital Gains
  3. Leveraging &
  4. Tax Free Income

When you decide to purchase an investment proeprty, you ideally want to reduce your tax, minimise risk and leverage what small cash or capital you might have. Also if you are able to produce a tax free income then buying a property through your SMSF can open up plenty of opportunities for you.

However people often think that buying a property through your SMSF is risky and this has been brought about through a lot of media hype and bad coverage. In spite of this, buying property within your SMSF makes a great investment and I will show you why.

1) Asset Protection
By holding assets within your super, these assets are actually protected in the event you default on personal debts/Mortgages etc.

For example, if you are driving a car, but your insurance has lapsed and you accidentally run into the back of a Bentley, you can be sued. What this means is all of your assets in your personal name are at risk. However, any assets such as property held inside Super are totally shielded from litigation which would be beneficial in this situation.

The Government has set Super up in such a way that it ensures your Super cannot be accessed until preservation age is reached, so even if you end up bankrupt, your Super is still protected.

2) Minimising Capital Gains
If you sell a property that is in your personal name, you are actually exempt on 50% of the capital gains tax as long as you have held that property for 12 months or longer. However, 50% of any profit that is made is added to your taxable income for that year. This can actually end up costing you tens of thousands of dollars.

Instead, if you end up keeping hold of a property right into preservation age, you will pay no capital gains tax on a property that you sell. A property that you end up holding for 20 years could actually save you $100,000 or even $200,000 in tax which is huge. You also need to bear in mind that if you end up selling a property within your super before you reach preservation age, you will also pay significantly less in capital gains tax.

3) Leveraging
When Alex bought his first property he had $80,000 in his super fund and if he was really lucky over the next 10 years that could have grown in value to $200,000.

Instead, Alex used $41,250 and was able to secure his first SMSF property which took approximately two years to build and complete. Each week he decided to salary sacrifice a little extra so that once settlement arrived, he had enough money, but he ended up selling the property at settlement.

After capital gains was taken care of, Alex managed to pocket back $236,000 into his super fund in the course of just two years. However, this was only possible due to leveraging his small amount of cash in order to hold a much larger asset.

4) Tax free income
One little secret that you might not know about is that if you hold on to your investment property all the way into retirement, any income that you make from your investment property is tax free. This is something definitely worth thinking about.


Is your money working hard enough for you?

Have you checked your super fund lately and do you know how much is currently inside your super account? Perhaps $50,000 or even $100,000?  Don’t let opportunities pass you by - instead you should start taking action today.

If you would like to see your Super working harder for you or would like to know more about SMSF and Property, speak to one of our friendly iBuyNew Property Consultants.

Give us a call on 1300 123 463 or complete our enquiry form.

Published on 1st of January 2020 by Michelle Leftwich
Michelle Leftwich
Michelle Leftwich


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