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Make smarter property investments with your SMSF

We all want to get the most out of our retirement income. If you are looking into ways of taking greater control over your superannuation, perhaps it's worth considering the benefits of investing in property through a self-managed super fund (SMSF).

Australian Taxation Office (ATO) figures show that Australia is home to more than half a million established SMSFs, a number that continues to grow year-on-year. Before making any major decisions, it's worth looking into the benefits of switching to an SMSF to see just how much of a difference it could make to your financial future. 

Property investment through an SMSF can maximise your retirement income. Property investment through an SMSF can maximise your retirement income.

Great options for small business owners

For many small business owners, the most obvious benefit of choosing an SMSF comes with the ability to purchase your business premises with your fund. While you are not permitted to use your SMSF to buy residential property for yourself or any members of your fund to live in, it is perfectly above board to purchase commercial land and buildings used wholly and exclusively in a business. As long as your intended property meets the ATO's in-house asset and related party acquisition rules, your business can effectively pay rent back into your SMSF after making your purchase.

"The flexibility allowed with an SMSF can be of real financial benefit."

Make the most of a residential rental 

For those who aren't small business owners, or are simply more interested in the residential property market, there are still plenty of options for investing with your SMSF. The in-house asset rule prevents fund members from benefiting from 95 per cent of their SMSF assets. However, as with the commercial property investment outlined above, a residential rental property can be purchased, which will see rent paid back into your fund. As long as you or your trustees are not living in the property, investing in the residential market falls within the rules. 

Greater flexibility of investment

While there is a lot to be said for the "set and forget" method of superannuation favoured by the majority of Australians, the flexibility allowed with an SMSF can be of real financial benefit. As part of a large super fund, change can happen slowly – if it happens at all. The freedom offered by an SMSF means you can rapidly change your investment portfolio, buying and selling property as the market shifts to maximise the gain in your fund. You have full control over your fund, and the valuable ability to be able to change things up as needed without potentially costly delays. 

Take control of your superannuation and reduce your tax exposure.Take control of your superannuation and reduce your tax exposure.

Reduce your tax exposure

Holding property investments in your SMSF is an incredibly effective way to minimise your tax exposure. The federal government keeps tax on all super funds capped at 15 per cent, meaning the maximum tax payable on any property investment is also pinned to that value. Similarly, any properties held by your fund for more than 12 months will have a capital gains tax (CGT) rate capped at 10 per cent. Lastly, the CGT drops to zero if your property is sold after your retirement, potentially saving you hundreds of thousands of dollars. 

As you can see, the SMSF field is not without its complications, but for those willing to put in the time to learn about and maintain their super, it can offer some fantastic benefits. If you are surveying your super options, it pays to speak to the ATO or the Australian Securities and Investments Commission to help you get your fund started on the right foot. When you're ready to start looking at investing with your SMSF, a buyer's agent can help you find the best property deal, potentially saving you even more money down the line. 

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