5 ways to win when you buy an investment property with your self-managed super

11 January 2024, 12:24 am

Super & Property Investment – 5 ways to win when you buy an investment property with your self-managed super

Recently we’ve been talking to clients about the property market. It is interesting that whilst some people are familiar with using a self-managed super fund to buy property, it is by no means a universally used strategy.

Of course, your personal circumstances will dictate whether or not you should invest in property using your self-managed super fund, however, we thought we’d discuss the five benefits that you can realise if and when you do.

Investing in property through a Self-Managed Super Fund (SMSF) has become more popular in Australia for people seeking to secure their financial future.

There is a long history and potential for long-term growth of property and this can give the investor the ability to take control of their retirement savings. Property investment within an SMSF offers additional advantages.

1.Tax Efficiency:

One of the primary advantages of investing in property through an SMSF is the potential for tax efficiency. Contributions made to an SMSF are generally taxed at a lower rate compared to personal income tax, providing an opportunity to accumulate wealth more rapidly. Additionally, any capital gains generated from selling the property within the SMSF may be eligible for a discounted capital gains tax rate if the property is held for more than 12 months.

2. Diversification of Investments:

Diversification is an important principle in sound financial planning and management.

An investor can achieve a well-rounded investment strategy by incorporating property into their SMSF portfolio. Real estate can help spread risk and may enhance the overall stability of your SMSF portfolio, particularly during periods of market volatility.

3.Control and Flexibility:

Unlike traditional superannuation funds, an SMSF provides investors with a high level of control and flexibility over their investments. When investing in property through an SMSF, trustees have the authority to choose the specific property, manage property expenses, and decide on the timing of property transactions. This control allows you to make strategic decisions aligned with your personal financial goals and the prevailing market conditions.

4.Rental Income and Capital Growth:

Property investment offers the dual benefits of rental income and potential capital growth. Rental income generated by the property can contribute to the SMSF’s cash flow, helping cover property-related expenses and loan repayments. The Australian property market has a historical track record of delivering solid long-term capital growth, providing an opportunity for your SMSF to grow in value over time.

5.Asset Preservation for Retirement:

Investing in property through your SMSF allows you to build a tangible asset that can serve as a source of income during retirement. Upon reaching retirement age, trustees have the option to sell the property or continue receiving rental income, providing a reliable income stream in addition to any other superannuation benefits. This can enhance their financial security in retirement.

Investing in property through a Self-Managed Super Fund in Australia presents a compelling opportunity for individuals seeking to take control of their retirement savings and achieve long-term financial success.

The tax advantages, diversification benefits, control, rental income, and potential for capital growth make property investment within an SMSF a strategic and rewarding choice for savvy investors.

As with any investment strategy, it’s crucial to conduct thorough research and seek professional advice to ensure your SMSF aligns with your financial goals and risk tolerance.

The information in this article is general in nature and does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.