Did you know that you can use your SMSF to purchase an investment property in Australia?

Buying property inside super can prove to be a big draw card. This is because of the potential tax benefits of structuring it this way.

If you were to buy an investment property outside of your super fund and then sell it, you need to pay capital gains tax however, if you buy a property in your 50’s for example, then sell the property 15 years later when your super switches to the pension phase, then your tax can be reduced to zero.

There are a number of loan packages available through most major banks and lending institutions so it is important to find the right one. This is where Mortgage Solutions can assist you, with their extensive product knowledge having done the research – you will no doubt save hours and hours of time and possibly thousands of dollars.

Some feature and benefits of a SMSF Loans:

  • The SMSF must purchase a property from an unrelated party
  • They are suitable for Australian residents with an established SMSF or for those planning to establish an SMSF
  • Loans amounts can vary from $200,000 upwards
  • You can use your rental income to assist with the monthly repayments – your SMSF makes the actual repayments
  • Once you have paid off the property it is transferred to the legal ownership of the SMSF
  • Rates can be variable, fixed or a combination of both with payment options of principal and interest or interest only (for a period of time)
  • You can secure flexible terms from 1-30 years with interest only for up to 15 years
  • The SMSF can manage a property as a traditional owner would eg; you can make repairs, renovations, lease it and sell it etc
  • There is limited recourse for defaults on payments ie; if there was a loan default, the lender can only take security over the property, no other assets in the SMSF
  • You can purchase property worth more than the actual funds in your SMSF
  • Interest expense may be claimed as a tax deduction

How does the SMSF Loan Work?

If you decide to purchase a property through your SMSF you can use the funds within the SMSF to do this.  If you do not have sufficient funds in the SMSF, you can use a portion of the equity in the fund and then borrow the remaining funds via the SMSF Loan we have described.

The property is held in trust in the SMSF, you apply for funds through a lender, the SMSF pays the funds to the lender, and the tenant pays the funds to the SMSF.

To obtain more information on SMSF Loans, please contact us on 1300 857 762 today for a no obligation discussion.