9 Reasons for investing in property with an SMSF - Squirrel

9 Reasons for investing in property with an SMSF

A lot of people consider property as one of the safest investments among all the commodities. Although the property market can change rapidly, if chosen well, property can offer a good capital return.

In addition, it can be much easier to understand and manage a property in comparison to other commodities, for example, shares or bullions. If you have done your research and are confident that buying an established property may deliver both capital growth over the long-term, and regular rental income, then maybe it’s time to think about a SMSF. Having an investment property as part of your SMSF also has other benefits, such as these:

  • 1. Creating a Property Portfolio  

    Imagine this scenario; you’re driving in your car, and you drive past one of your own properties. You feel a connection and feel proud for the moment, because that property is owned by your SMSF. You cherish that feeling of watching the brick and mortar in front of you as an indicator of how your super is performing. You don’t rely anymore on the annual statements from your super provider to evaluate your fund’s performance. SMSF can help you create your property portfolio.

  • 2. Potential rental income  

    Even though the rental market can change over time, generally property is a reliable investment and whenever your property is rented you’re receiving an income from it. Consider choosing an investment property that appeals to the most number of potential tenants, to ensure a regular stream of income for you when leased.

  • 3. Tax benefits

    There are significant advantages to having a property in an SMSF, including tax – your super fund will be taxed at 15 per cent – which is considerably lower than most people’s personal tax rates.

Another example is this: If you sold your SMSF investment property a year after purchasing it, you’d have to pay a much lower capital gains tax than you would if you sold a property outside an SMSF.

The difference is: 10% or 15% capital gains tax for an SMSF investment property, versus 38.5% or 46.5% capital gains tax for a normal investment property. You can also negatively gear an SMSF investment property, although less so.

Once you are retired, there will be ZERO capital gains tax on your SMSF investment property.

  • 4. Capital growth

    This is one of the main reasons to invest. Despite paying capital gains tax on the increased value of the property, if you decide to sell an investment property, it can still be beneficial if it’s part of your financial strategy. You can research this more by looking at information provided by RP Data/Rismark, which provides a quarterly Australian residential property market wrap that outlines growth areas in the capital cities.

  • 5. Come out of the uncertainty of the market

    Traditional super companies invest your money in a variety of commodities, for example, Australian and international shares, growth alternatives, defensive alternatives, real estate, cash, bonds or infrastructure, which means that the results depend highly upon the market. There can be growth in some cases, however chances of negative returns are also prevalent. Many Australians don’t like the ambiguous nature of the returns.  Investing in property through super takes away that uncertainty to quite an extent.

  • 6. Alternative way to utilize your Super  

    Traditional super companies make money for themselves from your money. There is an alternative to this; you can use the money in your super account as a deposit for buying your investment property.

  • 7. Tax deductible expenses  

    This is another popular reasons why people like the idea of investing in property through super, as all the expenses to run the property, taxes, maintenance charges, strata fees etc., are tax deductible.

  • 8. Save on capital gains tax  

    This is one of the most popular reasons why people like to invest in property inside SMSF. If the property is sold during the accumulation phase, the capital gains tax is calculated at a discounted rate. However, if the asset is sold while the super fund is in pension phase, it’s tax free. It means, you can sell off your property, make a profit and take home all the money as you are not required to pay any capital gains tax (CGT), after retirement.

  • 9. Perhaps a step closer to the Australian dream

    The Australian dream is the belief that in Australia, home-ownership can lead to a better life and is an expression of success and security. Although this standard of living is enjoyed by many in the existing Australian population, rising house prices compared to average wages are making it increasingly difficult for many to achieve the “great Australian dream,” especially for those living in large cities. Buying property using your super can help you take a step closer to that dream.


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