SMSF & Property Investment
Did you know it was possible to use your existing superannuation balance to acquire property?
Your existing superannuation balance can form a substantial deposit for the purchase, while the rest can be borrowed by the SMSF. The rent and your future superannuation contributions (employer or personal) can then be used to pay off your investment. If you use a salary sacrificing strategy, the time taken to pay off the investment can be accelerated substantially with the property being paid off in 7 to 10 years.
Who does it suit?
- Is looking to take control of their superannuation
- Has a preference for direct property, rather than shares
- Believes their current superannuation is under performing
- Wish to retire at some point to the beach or country and wish to purchase their retirement home at today’s prices, with a view to moving in retirement
What are the benefits of using an SMSF to invest in property?
- Tax on any rental income after expenses is only 15% rather than at your marginal tax rate.
- The deposit and stamp duty required on the purchase are funded by your superannuation, rather than your personal savings or further borrowings on your home. That leaves your personal savings intact.
- Rather than just using the rental income to pay down the loan, your employer superannuation contributions can also go towards the loan. This means you may need to rely less (if at all) on your salary and wages to help fund the investment which leaves your lifestyle unchanged.
- By choosing to salary sacrifice more into superannuation, above and beyond you employer contributions, you can save tax personally by reducing your marginal tax rate and at the same time provide the SMSF with the ability to pay down the loan faster. A very effective approach used by the wealthy.
- The maximum tax, should you sell the property after 12 months is only 10%.
- The potential tax should you sell the property in retirement or pension phase is Zero, based on current legislation. The best kept secret!