Advantages of Buying Property through SMSFs

Today, an increasing number of investors are buying property through Self Managed Super Funds (SMSFs). After legislation changes in Superannuation Industry Supervision Act (SIS ACT) in 2007, your self-managed Super Fund can be used to borrow funds in order to purchase a property of any kind – from residential, commercial, to rural.

The changes introduced to legislation allow Self Managed Super Funds to borrow money, as long as an acceptable structure was utilised.

SMSFloans basically are ‘Limited Recourse’, that means the lender cannot have any asset acquired through the Self Managed Super Fund other than the property provided as collateral. Simply put, the rights of the lender against the super fund in the event of the facility defaulting are limited to the security of property.

In this article, we are discussing the advantages of buying property through SMSFs.

There you go.

Advantages

• If you buy a property with your super fund, hold it until you retire and you come under the pension phase; as you will need not pay tax on capital gains, whether you sell, rent or hold the property.
• Before retirement, rent and capital gains earned by the SMSFs are subjected to be taxed only 15 percent. And if you hold the property for more than a year, the tax rate would be dropped to 10 percent on capital gains.
• You would get direct control of your super investments and understanding of where the money is being invested.
• Diversification in your portfolio
• Expenses such as interest can be claimed as tax deduction
• No capital gain tax on sale of property if sold during pension phase
• Wider investment options and control over your future
• Funds can be paid out or borrowings reduced at any time
• Funds can be used to acquire property for a greater value than that of the funds’ ‘Net worth’
• All Self-Managed Super Fund assets are safe and cannot be violated by any lender owing to the limited recourse provisions in section 67 (4A) of the SIS (Superannuation Industry – Supervision) Act

Here are some features of Self-Managed Super Fund loans:

• Residential property borrowing up to 80% LVR and up to 30 year terms
• Rural Property up to 65% LVR and up to 20 years
• Commercial property up to 70% LVR and up to 20 years

Depending upon the facility, rate of interest varies.

You can approach an alternative lender like Global Capital Commercial to understand the benefits of SMSFs.