Buying a Melbourne Property with Your Super
In this article, we’re going to look at five reasons why you should consider buying investment properties within your self-managed super fund (SMSF).
Buying a Melbourne Property with Your Super benefits of investing in property with your SMSF including tax efficiency. This is because SMSFs are designed as retirement savings vehicles so any income they earn on investments is taxed at a rate of 15%, which is significantly less than the marginal tax rate that applies to your personal finances.
You can also buy residential and commercial property within your SMSF if you meet certain rules. For example, your SMSF must have sufficient cash reserves to cover expenses associated with the property and maintain a liquidity buffer of 10% of the investment property’s value. This is important because any improvements made to the property will need to be funded from your SMSF’s cash reserves and not from borrowings.
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It’s also important to note that a fund member or a related party cannot live in the property. In addition, you can’t purchase a residential property and then lease it back to your business, or vice versa. This is known as the arm’s-length rule and is intended to ensure that your SMSF is acting in a completely independent capacity from you as an individual.
If you’re interested in buying a property with your super, it’s always best to seek qualified and experienced advice. We can help with all your SMSF needs, from setting up a trust structure to arranging finance for your property investment. Contact us today and we’ll be more than happy to help.