Recent changes to superannuation legislation now allow self managed superannuation funds (SMSFs) to borrow to acquire residential and commercial properties to support their investment strategies.

How does it work?

Your SMSF borrows funds to acquire a residential and/or commercial property and a separate trust is established/appointed to hold legal ownership of the property on behalf of your SMSF. The SMSF takes out the loan and contributes cash to pay the deposit and meet legal costs and stamp duty. The SMSF then manages the property in the same way as you would any other real estate investment. The loan is a limited recourse loan and the property is used as security. In the event of a loan default, the lender only has recourse to the property. They cannot claim on any other SMSF assets.

Accelerate your wealth

Accelerate your wealth accumulation and diversify your investment strategy by using your SMSF to purchase residential and commercial properties. The property is leased from the SMSF on commercial terms. Lease payments and other income enable the SMSF to meet the loan repayments and expenses associated with the property.

When the loan is repaid, legal ownership of the property can be transferred from the trust to your SMSF.

Who will benefit from this strategy?

  • A member of a SMSF
  • Those wanting to invest in residential and/or commercial property within their superannuation fund
  • Those with a long-term investment timeframe.

What are the benefits?

  • Accelerate wealth accumulation – unlock cash for investment purposes
  • Asset acquisition – diversify your SMSF investments through the acquisition of property
  • Rental income assists in repaying your loan – rent is repaid directly to the trust with loan repayments made in the normal way
  • Gearing benefits – the trust is able to offset loan interest and expenses against rental income.  Your SMSF is entitled to any net income of the trust
  • Income tax benefits –concessional tax rates apply for income after expenses
  • Limited recourse – lender only has recourse to the property and not any other assets within the SMSF

At The Quinn Group our experienced team of Financial Planners, Accountants and Lawyers can assist you with all your investment strategies. For more advice about how to invest in your Self Managed Super Fund, contact the Financial Planners at Quinns by submitting an online enquiry form on our financial planning website, or call 02 9580 9166 to book an appointment.