Recently, many clients have chosen to purchase property through a self-managed super fund (SMSF) due to its clear advantages. Today, let's take a look at the relevant rules for buying property under an SMSF.
Self-managed super fund rules
Self-managed super fund (SMSF) is established for the purpose of benefiting people after retirement. Before retirement, people can not make profits for themselves through pension. Therefore, the rules for the use of SMSF are carried out under this premise, and the control of it is very strict. The property purchased cannot be occupied by oneself or rented to one's relatives or friends, even if it is paid at the market price. If one purchases a commercial property with a SMSF, the commercial property can be rented to one's own company as an office space, and the commercial property in one's own name can also be transferred to the SMSF account.
Set up self-managed super fund
When setting up a SMSF, initial documentation is crucial. Especially when many people want to use their own pension to buy property and borrow from the bank, it is even more important to ensure that all documents are carefully prepared. The preparation of these SMSF documents is basically completed by financial planners and accountants. When setting up a SMSF, a financial planner can ensure that it is in line with the relevant regulations of the Tax Office and our personal goals, and it makes the whole process easier. Financial planners know every step of the way from establishment to operation. Accountants will provide us with daily tax filing and auditing services related to our SMSF.
Self-managed super fund contribution
From July 1, 2024, the annual amount that can be deposited into a SMSF account has been increased from the previous $27,000 to $30,000, and individuals can log on to the ATO to check how much of their personal superannuation can be deposited.
Purchase property through SMSF
If you need to buy a house through a SMSF account, you can do so in two ways. The first way is to buy a house using the money in the SMSF account without having to go to the bank, and it requires the establishment of a SMSF trustee, which is relatively less complicated. The second case is that you need to borrow money from bank or other lenders to buy the property, it requires the establishment of a bare trust trustee to hold the property and an escrow trust to connect the bare trust to the SMSF.
SMSF Advantages
1. More investment options
2. Flexibility & control
3. Effective tax management
4. Accountability
5. Pooling your Super with other
6. Estate planning
SMSF Disadvantages
1. Duties & responsibilities
2. Compliance requirement and expertise
3. Costs of running your fund
4. Higher insurance costs
5. Time and effort
6. Living overseas can become difficult
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