SMSF PROPERTY MADE EASY

There are many advantages to having a Self Managed Superannuation Fund (SMSF). By having your own SMSF, you get to control your Superannuation, and run the fund for your own benefit. This means you control what the fund invests in, such as shares, collectables, etc (as long as the investments fit within the SMSF legislation). We believe the biggest advantage of a SMSF, is the ability to purchase property within the fund. ​

There are many SMSF specialists and professionals who can help set up, manage, and keep your fund compliant for you, which saves you from having to worry about all of the technical and complicated stuff. We highly recommend using the services of professionals such as accountants or financial advisors who specialise in SMSF’s when considering buying property in your SMSF.

Some of the top reasons for using your SMSF to invest in Property

Property investment comes with many benefits, especially in terms of income generation in retirement. Here are some of the top reasons for using your SMSF to invest in property:

• During the SMSF saving phase, the tax paid on your Superannuation is capped at 15% and in most cases the average tax rate of Superannuation funds is less than this (due to rebates and deductions). Therefore, building wealth in your own name outside of Super (potentially being taxed at 46.5%) versus inside the Superannuation environment (taxed at 15%) can make a significant difference.
• You don’t pay any capital gains tax if the SMSF sells an investment property during its pension phase, no matter how much the asset has risen in value over the years. Again, this can save you a significant amount of money, and allow you to live a lot more comfortably during retirement.
• Property investment is typically not as volatile as other investments such as the share market, which minimises your risk in a market downturn. If your Super is in a Managed fund, you have no say as to where your money gets invested. When there is a downturn in the market and your Managed Super Fund incurs a heavy loss, who is held accountable? The answer to that is – No one!
• With a SMSF, you are in control and accountable for your own investment choices. When you are in the ‘driver’s seat’ you will typically take more interest and this can lead to a positive snowball effect, which has the potential to outperform a Retail or Industry Super Fund multiple times over.
• A SMSF can borrow up to 80% for residential, and 70% for commercial property from certain lenders to purchase property. This means the SMSF only needs to contribute 20% – 30% deposit to invest in property.
• The Bank who loans funds to your SMSF for property investment, recovers the debt from the Superfund, not from you personally.
• Commercial and residential property in an SMSF can give you tax, business, and asset protection benefits.
• If you own a business, your SMSF can own your business premises. This can be extremely beneficial for any business owner. Why would you have your business paying rent to someone else, when it could be paying rent to build up your Superfund?

Buying property INSIDE of your SMSF vs buying property OUTSIDE of your SMSF

Let’s imagine you purchase a property within your SMSF and the property is sold any time during the ‘pension phase’. You won’t pay any Capital Gains Tax (CGT) which could literally save you hundreds of thousands of dollars.
Let’s compare how much you could save in CGT when purchasing an investment property inside of Super versus purchasing the same property outside of Super:

• Purchase price: $400,000
• Anticipated rate of growth: 6% p.a.
• Investment term: 20 Years

​Overall tax advantage of SMSF structure = ​$205,263

If you were to purchase this property in your Super then sell it 20 years later during retirement, you could retain an extra $205,263 compared to purchasing the property outside of Super. This could make a significant difference to your retirement years. Imagine how much difference buying two, three, or four of these properties in your SMSF could make to your retirement, compared to buying them as a standard investment outside of your Super?

The basic process of setting up an SMSF and purchasing your first property

• Establish an SMSF Trust – This is a legal entity which can consist of 1 or more members (up to 4).
• Choose trustee structure – This can be an individual trustee (up to 4 trustees), or a corporate trustee, which is essentially a company acting as trustee for the SMSF. The members of the SMSF would be the directors of this company.
• Establishment and signing of the trust deed – This is the legal document that sets out the rules for establishment and operation of the SMSF.
• Register the SMSF with the ATO – Once registration is approved, the Fund will be issued with an ABN and a Tax File Number (TFN).
• Open a bank account – The SMSF needs its own bank account to roll over any existing Super, accept cash contributions, receive income from investments, and pay any fund expenses.
• Prepare investment strategy – This is done with a Financial Advisor who specialises in SMSF’s.
• Roll over funds – All, or part of the funds from any other Super Funds can now be rolled over into your SMSF.
• Set up Bare Trust – If your SMSF needs to borrow money to purchase a property, it must be done using a Bare Trust. You must have a separate Bare Trust for each property you purchase within your SMSF. This ensures protection over the rest of the SMSF in case of any default.

Why Choose Easy Property?

First and foremost, Easy Property provides a comprehensive assessment and recommendation of the best investment property to meet your financial goals.

This is done via individual consultation with you to confirm your goals, and to ensure we take away the stress and worry of choosing the right property.

As part of our service, we also oversee the entire process of setting up your SMSF:

Our total solution includes:

• Establish your Self-Managed Super Fund
  
• Setup of corporate trustees
  
• Manage the Superannuation rollover from your existing fund(s) into your Self-Managed Super Fund
• Establish a full Financial Plan for the Self-Managed Super Fund and its members. We include this financial plan in order to arm you with the right knowledge for making the most of your Self-Managed Super Fund once it’s set up. This is to ensure you don’t end up with the entities and the structure, without the strategy to make them work for you
• Setup a Bare Trust

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The investment to set up your Self-Managed Super Fund and get all the above in place can be paid out of your super balance. Or, if you choose, you can pay this out of your taxable income, and claim it as a deduction for tax advice

To take control of your Super and make it work for you, simply contact us to take the next step!