If you are looking to control your Super and are unhappy with your Industry Super Fund returning consistent poor or negative returns like many other Australians you now have more options in regards to a SMSF. In 2007 the Australian Government made it possible for ordinary Australians to borrow money to buy property in their SMSF. Before setting out on this journey you must ask yourself 3 simple questions as everyone's goals will differ and each of us has a unique financial position.
- Do you have an Existing Industry or Platform Based Super Fund with a combined minimum balance of $80,000?
- Are you looking to control your Super Fund Investments?
- Are you looking for a low cost Self-Managed Superannuation Fund Solution?
If you have answered "YES" to the above questions, purchasing a property with SMSF might be a good start for building the foundation to your retirement wealth.
Frequently asked questions
Can I buy an Investment Property with my SMSF?
Yes. There are things that need to be considered before you do. You can buy any sort of property however Residential Property must be an arms length transaction from a third party. You can buy Commercial Property from a related party if certain conditions are met.
Can I borrow to buy property through my SMSF?
Yes, but there are guidelines to follow to allow this to happen. Changes to the Superannuation Industry Supervision (SIS) Act in September 2007 now means SMSFs can now borrow to purchase real estate using a structure established for this purpose as long as certain conditions are met. There are various loan products offered which enable these purchases to be made.
Can I buy Property from my SMSF that I already own personally?
In some instances yes, it will depend on whether the property is residential or commercial. You can buy a commercial property that you already own and even borrow against it as long as you meet the borrowing criteria. If you want to buy a residential property then it must be at arms length and not currently owned by a related party, it must be purchased from and leased to an unrelated third party.
Can I rent property from my SMSF?
You cannot rent residential property from your own SMSF; however in some circumstances you will be able to rent a commercial property if it is for business purposes. The rent will have to be at a market rate and the premises will need to be for running your business.
What is an Investment Strategy?
To set up and run your own SMSF you must have an Investment Strategy in place. The trustee of a SMSF is required to prepare and implement an investment strategy for the fund. The strategy must reflect the purpose and circumstances of the fund and take into account:
1. How to maximise its member returns while taking into account the risk;
2. There should be diversification in this long term investment strategy; and
3. The ability of the fund to pay benefits as members retire, and other expenses incurred by the fund.
4. The Trustees must be certain that all investment decisions are made in relative to the investment strategy of the fund and should seek advice from an investment manager in writing if in any doubt.
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If you are interested in setting up a Self Managed Super Fund or in finding out about investing in property through a SMSF, please contact us.