7 Reasons to Invest with YOUR SMSF
As of September 24, 2007 legislation has allowed Australians to borrow from their self-managed super fund. Now, in excess of $26 billion, or at least seven per cent of all self-managed super funds (SMSFs), are held in unlisted property.
Is this merely a trend? No. Many investors are investing through their SMSF. This is because the benefits outweigh any other type of investment strategy or finance solutions. Before you disagree, consider these seven reasons:
- If you are over 60 years of age, you can construct a tax-free income without capital gains tax.
- If you are under 60 years old, your capital gains tax is only 10% and your rental income tax is only 15%.
- You can access greater investment choices. However, if you want to buy a residential property, it must be at arm’s length and not owned by a related party. It must also be leased to an unrelated third party.
- You can reduce risk and speed up the payments of the mortgage with a positively geared investment.
- If you borrow safely, you can beat inflation.
- If your loan is non-recourse, your other assets will be protected in case of an investment gone awry, insolvent, or sold. This also protects trustees from being individually pursued for debt or other liabilities.
- You can also reduce your SMSF’s tax liability by claiming the interest expenses as a tax deduction.
Whether you are an SMSF trustee or fund member, speak with a property investment expert before investing through an SMSF. Too many mistakes can occur and the risks are very high. Make sure you FULLY understand the lending requirements because loans have to fulfill strict limited recourse criteria. Check a super fund lookup if you must.
If the SMSF fund and related trusts are not set up correctly, or if you do not adhere to the rules of the governing relationships with related parties, you may face strong offences from the Australian Tax Office.
Talk to one of our experts regarding your SMSF and learn how to properly invest using this.