Earning money by investing in property benefits everyone, especially after retirement. All you have to do is purchase real estate and make money through rental income. The return on investment will help you for a stress-free future. Although you might have little savings, you might need more to purchase the property. Where can you get more funds for your investment? Well, you can opt for SMSF property investment or borrowing.
What are SMSF property investments?
SMSF, which stands for self-managed super funds, has become incredibly popular with many Australian investors. That’s because superannuation has been made compulsory since 1992. As per Australian statistics, 1000 self-managed super funds are registered each week. These funds are private and can easily be managed by you. That’s not all; you can also take help from a third party. The SMSF members are trustees, meaning they must comply with the regulations and laws regarding tax or super. You can invest in residential and commercial properties with the help of SMSF investment property or borrowing.
What are the advantages of SMSF investment property?
There are several advantages of purchasing a property for investment purposes with super or self-managed super funds. Following are a few benefits.
- It increases superannuation opportunities: You can increase your superannuation opportunities by owning a property with the help of an SMSF. If you have purchased a property by SMSF for commercial purposes or to run your business, you must comply with the superannuation rules. The rule states that your business must pay the funds for rent. As a result, you can expedite the superannuation savings. But you must remember that the tax will be deducted from the rate of rent paid for superannuation, and it will not be a part of the superannuation contribution. The tax benefits for such contributions are extremely limited to around 35,000 dollars for those above 59 years of age. You can benefit from your tax and retirement swiftly because of tax-deductible rental payments.
- It provides the ability to leverage your assets: Purchasing an investment property through SMSF can help you leverage assets. You can attain the opportunity to utilise your rental income and capital growth to borrow against the property. Moreover, you can fund your investment property further with an SMSF.
- It offers estate planning requirements and nominations: The self-managed super funds provide flexibility with your requirements and needs. Suppose you want to legally nominate a person to receive the superannuation benefit after your death. In that case, you can easily do so by the binding death nomination, provided that you are an SMSF member. But you must ensure the binding is valid by nominating only dependents like spouses, children of your age, etc. In addition, the trust deed must allow such nominations. Also, you must update the nominations every three years. As a member of the SMSF, you can specify the method the death benefits will be paid.
- It helps reduce capital gains tax: Capital gains tax is a tax paid by making profits from selling property, provided that you have owned the property for more than 12 months. As per the Australian Taxation Office, your income tax return consists of capital gains tax. If you buy a property with SMSF, the capital gains tax (CGT) will be capped at 10 per cent. And you will not be liable to pay CGT if you convert super into a pension.
SMSF property investment is a suitable strategy for borrowing funds. You can search for expert consultants online who can advise and recommend strategies and provide you with investment opportunities at a low cost and for better performance.