Self Managed Super Fund Property

Australia is undeniably grappling with a rental crisis as the demand for rental properties surpasses the available supply.

Various stakeholders, including governments, the property industry, charities, and others, are advocating for solutions to address this shortfall. One proposed remedy involves increasing rental properties, necessitating more investors to enter the market.

Data from the Australian Taxation Office reveals that a significant majority of landlords are over 50. State government rental legislation favouring tenants over landlords may prompt current property owners to consider selling, especially as these investments play a substantial role in individuals' retirement plans. Conversely, those in their 20s and 30s, recognising the supply versus demand opportunity and having over thirty years until retirement, are willing to invest for the long term. The challenge they face is saving a sizable deposit to enter the market. Individuals are increasingly exploring self-managed superannuation funds (SMSFs) to leverage these market conditions.

Key Advantages of a SMSF

Tax-Effectiveness

Super funds, designed for retirement savings, are taxed at a rate of only 15%, significantly lower than personal income taxation.

Business Benefits

SMSFs allow the purchase of commercial premises, which can be leased back to one's own business. While the lease must adhere to the current market rate, the revenue benefits the SMSF.

Increased Purchasing Power

SMSFs, with a potential membership of up to six individuals, provide extra purchasing power. Additionally, borrowing to acquire property within an SMSF is possible through Limited Recourse Borrowing Arrangements.

Reduced Capital Gains Tax

Holding property in an SMSF structure offers tax benefits related to Capital Gains Tax (CGT). For properties held longer than 12 months, the fund receives a one-third discount on any capital gain, limiting CGT liability to a maximum of 10%.

Direct Control

SMSFs uniquely allow direct ownership of property and provide control over investment strategies, diversification, and overall portfolio management.

Is a SMSF right for you?

Before opting for an SMSF, thorough research, especially regarding property purchases, is essential. With likely limited assets (one or two properties), careful decision-making is crucial. Additionally, considerations for loan repayments during tenant vacancies and the complexity of SMSFs compared to industry or retail funds should be weighed. While SMSFs present challenges, they also offer a higher level of engagement with one's finances. Venture SMSF Services and Endeavor Finance's local teams can provide guidance on establishing an SMSF and securing financing for property investment.

Contact us today to find out more.

General advice warning: The advice provided is general advice only. In preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

Liability limited by a scheme approved under Professional Standards Legislation. Any taxation and accounting services are provided by Venture SMSF Services and are not within the authority of Count Financial Limited’s (“Count”) Australian Financial Services Licence number 227232.