Investing in property through your self-managed superannuation fund (SMSF) can be a strategic way to build wealth for retirement.

You can utilise the funds in your SMSF to purchase residential or commercial property. In this situation the property is owned by the SMSF and generates rental income, which is taxed at a concessional rate of 15% within the fund. By investing in property through super, you can potentially benefit from tax concessions, especially when compared to investing in property outside of super. The capital gains upon selling the property in retirement may be tax-free, subject to certain conditions.

SMSFs can borrow money to acquire property through a Limited Recourse Borrowing Arrangement (LRBA). This strategy allows the SMSF to leverage its funds by taking out a loan to purchase an investment property. The rental income generated by the property can be used to repay the loan, and any capital growth is accrued within the SMSF. Many also use it as a discipline to aggressively contribute more to their super fund with the aim of reducing the loan quickly whilst using the tax man’s money in savings when claiming super as a tax deduction. It’s crucial to note that investing in property through superannuation comes with complex, very specific regulations and compliance requirements. It’s essential to seek professional advice from financial advisors or SMSF specialists to ensure you understand the legal and financial implications of property investment within your super fund before proceeding. Call us if you’d like to know more.