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Using Self-Managed Superfunds to buy a property


It’s become more and more popular to purchase properties using a self-managed superfund.

However, doing so requires mindful consideration to avoid unnecessary risks. Acquiring properties and superfunds go hand in hand, you can use the superfund to borrow money to purchase assets such as property.

Here is some basic knowledge you must know before getting deep into acquiring a property using your fund.

SMSF is a type of trust and its’ sole purpose is to provide income retirement for the trustees. Nowadays, many clients are setting up an SMSF as it has its’ advantages like discounted capital gains and it is only taxed at 15%. Not only that, if the property is sold while the fund is at the pension phase it is tax-free. However, it is noted that it is not for everyone as it needs a lot of time and energy to manage. You will need to be in control of everything and it’s your responsibility to make sure everything is set up and managed correctly.

Now that you decided to set up an SMSF, you want to buy a property using it. It is perfectly okay because you want to generate an income from this fund, but you must note that there are conditions before doing so or it will be against the law.

Below are the rules when investing in any property using your SMSF:

· It needs to pass the ‘sole purpose test’ – this means that this is only done for the retirement benefits of the members

· No trustee or fund members is to live in it

· Property can’t be bought from a related party

· It can only be rented out to the market by a person or organization that is not related or is not the fund member.

It is best to speak to a qualified professional like The Tax Accountant to discuss all your options from a tax perspective and make sure that it works with your retirement goals.

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