Since 2007 individuals have considered buying an investment property in their superannuation fund for a number of reasons including,

  1. They feel that the purchase of an investment property is a good, sound, long term investment.
  2. Purchasing an investment property allows them to get the financial benefits of gearing. For example, if their superannuation account has a balance of say $150,000 they may use this as the deposit and borrow say $400,000 from the bank to buy an investment property for $550,000 in their Self-Managed Superannuation Fund (SMSF). This strategy means that they get growth on their $550,000 property rather than a return on only $150,000.
  3. They feel they have too much of their superannuation invested in shares or managed funds.
  4. They prefer to select their own investment property rather than invest in a listed or unlisted property trust.
  5. They can use their 9.5% statutory superannuation contribution from their employer to meet the cost of the maintenance of the property and/or reduce the debt on that property loan.
  6. They are able to minimise the capital gains tax implications when they sell the property as the maximum capital gains tax rate will be 10%. The capital gains tax may be zero if sold after they retire.
  7. They can pay down the balance of the loan on the property with before tax earnings i.e. superannuation contributions up to $25,000, rather than their individual savings.

The above highlights some of the reasons people choose this strategy.

Should you require further information on purchasing property in your Self-Managed Superannuation Fund, please feel free to contact Peter Quinn on +61 2 9580 9166.