Self Managed Super Funds

 

*SMSF

 

 

If you are considering buying a property through an SMSF, the first step should be to speak to a financial adviser, (JSA-Property can arrange for a free consultation) about whether this strategy would suit your investment goals, timeframe and feelings about risk.

 

A Quick Guide to SMSF

 

All builds must be completed, under construction or completed within 6 months.

A minimum of 20% deposit is required

You will need  Finance advice 

You will need assistance from an accountant or wealth manager to set up your SMSF fund, this may incur additional set up costs.

All properties purchases must be on a single contract, House and land packages are usually 2 contracts one for the land & one for the build, Here at JSA we can provide single contract Packages for SMSF use.

Any property can be purchased as a single contract but will incur additional costs to change from a 2 part contract to a single contract, averaging $20,000 to $25,000, this could potentially be a good option for high yielding Dual key properties with over 6% rental returns.

 


What are the advantages?
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.

There are several rules to follow when purchasing via SMSF
The property purchased must be for the sole purpose of supporting the SMSFs investment strategy in building wealth for retirement.
The property can be residential or commercial (yes you can buy your place of work and rent it back)
No family member or trustee of the superfund can live in or rent the investment.
You will need to put down a minimum of 20% deposit on your property.
It must be a single contract build, this means the land must be registered and ready to be built on, talk to your JSA property consultant about availability.

 

How much money do you need to get started?

 

As a general guide, you need a minimum of $200,000 in existing super savings for an SMSF to be a cost-effective option, minimum of $200,000 ensures you will have enough money to allow some diversification in your investments

Putting all your super into a property, rather than spreading a portfolio across other types of investment, could be a risk.

Remember, this recommended fund size is based on the entire fund balance, which includes the superannuation assets of all fund members (e.g. your spouse).

 

How much can you borrow?

Banks will generally allow SMSFs to borrow around 70-80 per cent of the property value, however it is more desirable to have at least a 50 per cent deposit so the property is positively geared or close to it, Generally all JSA_Property is positively geared starting from 5% return upwards of 7% for Dual key properties.

Tax-deductible personal super contributions, salary sacrifice contributions, and compulsory super guarantee payments made into your SMSF, as well as any rent your fund receives on the property, can all be used by your SMSF to help cover the loan repayments.

It’s also important to have a sound strategy in place to pay the property off over time, we can arrange a free financial consultation for you.

 

What are the benefits of an SMSF?

If you buy a property through an SMSF, the fund will pay a maximum 15 per cent tax on rent it receives from the property. On properties held for longer than 12 months, the fund receives a one-third discount on any capital gain it makes upon sale, bringing any capital gains tax liability down to a maximum of 10 per cent.

Once fund members start receiving a pension at retirement – assuming they’ve held the property in the fund for this long – the fund will no longer pay tax on either rental income or capital gains when the property is sold.

 

*These few simple facts are to give you an overview of the possibilities and are not meant as guidelines, we suggest you seek advice from an experienced financial advisor, or accountant, JSA except no responsibility for actions taken based on the information contained on this website.