Benefits & Limitations of SMSF Property Investment Finance in Australia

Changes to the super system announced by the government of Australia in the May 2016 budget has significantly widened the availability of property investment through a self-managed super fund (SMSF). It is important to understand this type of property investment is not meant for every builders, landlord or property investors. This post discusses some of the benefits and limitations associated with availing self-managed super funds.

Benefits of SMSF property investment

Benefit number 1# Tax effective

SMSF receives concessional tax treatment, as the preferred investment options for retirement savings. It is important to understand that the earning of SMSF is taxed at only 15%.  This means that the taxation amount is less than half the marginal tax rate that is usually paid by the majority of workers in Australia. Also, it is important to understand that the earnings within the pension phase are free from any taxes. 

Benefit number 2# Provides investors with purchasing power

The saving of the investors outside the SMSF environment may not be sufficient for investment in direct properties. Combining the capital within the other members of the SMSF though may give the investor the purchasing power that they need to invest. 

Benefit number 3# Provides investors with control over their investment

It is important to understand that many property investors in Australia enjoy having total control over the property investment they purchase. In addition to this, they also relish their ability to add value to their property investments through development work or renovation. 

Benefit number 4# Business benefits

You can purchase a commercial property for leasing back to their business, provided they pay a commercial rate of rent, while property investment cannot purchase a residential property to rent back to them. 

Drawbacks to SMSF property investment 

Drawback number 1: Lacks diversification

Diversification is more difficult to achieve in property investment in Australia if the SMSF of the investor owns just one or more large assets.  It is very crucial to understand that in SMSF property investment loan, the lack of diversification may not be in the best of interests of the SMSF members in Australia.

Drawback number 2# Investors cannot benefit personally from the property

 It is important to understand that the property investment within an SMSF must be purchased via an “arm’s length’ transactions. In addition to this, it must be precisely maintained on a strictly commercial basis. As such the investor cannot rent, purchase4 or sell the property to any related party in Australia.

Final thought

Investors in Australia should be aware of many small details when they want to invest with an SMSF. So it is important for any investor to do their market research and ensure that they get professional aid, assistance, guidance and advice from Australian property investment experts where necessary.

Sponsor Ads

• Ad Space Available - Rent it Now!

Report this Page

Created on Dec 31st 1969 18:00. Viewed 0 times.

Share on APSense

Comments