Buying property through self-managed super funds: what you need to know

If you’re considering setting up a self-managed super fund (SMSF) to invest in residential property, it’s important to understand the rules, risks and costs involved.

An SMSF is just that, but there’s more than one manager and multifarious financial commitments, legalities and responsibilities.

The Australian Taxation Office states that the difference between an SMSF and other funds is that members of an SMFS are also the trustees. 

Members running an SMSF for their benefit must comply with the super and tax laws. 

Is an SMSF right for you?  

There is a range of essential steps for interested members of an SMSF. These include: considering why you are heading in this direction and what investment gains and responsibilities lie ahead.

Firstly, an SMSF must be run solely for providing financial benefits for its members. 

The property must not be acquired from a related party of a member. 

Related parties and members are also not entitled to live in or rent out the property. 

So, if you are thinking it could gain you early access to your super or be used to purchase a holiday home or other home-related acquisitions, you should think again. 

Financial expectations

To buy a residential property for your SMSF, a 20 to 25 per cent deposit of the property value, plus five per cent for completion costs, is generally required.   

When it comes to SMSF property sales, there are also upfront, legal and advice fees, stamp duty, ongoing management fees and bank fees to account for.   

The benefits

Contributions and rental income are used to pay off the SMSF loan. 

This also accelerates the growth of your super. 

An added advantage is that loan interest is tax-deductible to your SMSF loan, thereby reducing tax liability. 

Once your SMSF fund owns the property outright, rental income can be used to fund retirement pension plans. 

Setting up your SMSF  

Your SMSF needs to be correctly set up in order to receive eligible tax concessions and other entitlements. 

This is why it’s important to receive professional advice and assistance. 

From choosing and appointing trustees to creating the trust, registration, ABN requirements, setting up a bank account and preparing an exit strategy – the financial minutiae of an SMSF is best left to professionals.

The inner workings

A number of post-establishment mechanisms, including contributions and rollovers; investing; paying benefits; winding up; administering and reporting, and SMSF auditors must also be considered.

Knowledge is power

Focusing on the fine detail paints the big picture for interested investors. 

This includes annual and quarterly SMSF statistical reports that focus on SMSF population demographics, asset allocation tables, such as asset size and value; as well as age and income of SMSF members on a state-by-state or regional basis. 

Official data sources, such as the Australian Bureau of Statistics and Stats NZ, can help in this area. 

Government websites such as www.moneysmart.gov.au and sorted.org.nz can also assist in providing the latest information about SMSF rules and regulations.

chrisbrown1224

Managing Director – New Vision Financial Services & New Vision Real Estate After years in the banking, finance & commercial sector Chris noticed that the industry needed a company with a personal touch that offered their customers a complete solution. In 2015 New Vision Financial Services was created to allow our consultants to use their experience (including approving and structuring large complex commercial transactions through to basic home loans) and to concentrate on offering a personalised service to their clients. With the growth and success of New Vision Financial Services a decision was made in 2019 to launch New Vision Real Estate to provide an end to end solution for client weather they be first home buyers or seasoned investors. Chris has built a team at New Vision Financial Services and New Vision Real Estate that have access to over 70 different lenders, insurers, lawyers, accountants and financial planners giving you more flexibility when making a decision. We offer a full service Real Estate agency offering Sales, Leasing, New Developments, House & Land and Commercial. Call me anytime on 0433 181 544 or email chris@newvisionfinancial.com.au The team at New Vision Financial Services have access to over 70 different lenders, giving you more flexibility when making a decision. Our consultants have had extensive experience within the banking, financial and corporate sector. At New Vision Financial Services we specialise in finance lending for home, investment, business, commercial, asset, debtor and many other requirements. As New Vision Financial Services has progressed, we have developed strong relationships with professional service providers such as; Financial Planners, Accountants, Settlement Agents, Leasing & Equipment Providers, Debt Management Specialists and any more to allow our clients access to a complete suite of services.