SMSF Property Loans

Are you an existing Self-Managed Super Fund (SMSF) trustee? Financial Scope Melbourne specialises in investment property financing strategies, and can help guide you through the complicated world of SMSF alternative strategies. There are alternatives to investing in managed funds and shares through your SMSF. Property investment is proving to be a popular alternative strategy, but it’s important to know the specific rules and regulations that need to be considered. Generally, you can obtain investment property loans of up to 70% or 80% of the purchase price of the property and roll your existing super fund into your SMSF to help with the deposit. It’s therefore important to know the advantages and disadvantages beforehand.

What is the difference between an investment property and a SMSF property?

The process for purchasing a property via a SMSF is quite different to traditional investment property. Whilst you can invest in residential and commercial property through your SMSF, there can be big differences in the fees payable and interest rates that are offered by the lenders.

Key benefits:

• Any expenses such as interest, may be claimed as tax deductions by the super fund
• Maximum of 15% tax on rental income
• Potentially there may be no capital gains tax on sale of property, if sold in pension phase
• A maximum of 10% capital gains tax on sale of property if held for at least 1 year

Disadvantages:

• Negative Gearing is available in SMSFs, however, as the tax rate is lower (15%) it may not be advantageous
• When using borrowed funds, there are strict rules that need to be adhered to in regards to the property or renovations
• Strict rules about purchasing and leasing properties to related parties