Properties purchased via your SMSF can potentially grow your wealth via capital gain, as well as providing rental income and minimising tax.
Self Managed Super Funds pay less tax on rental income (15%) and if the property is held for more than a year, capital gains tax is at 10%, which is generally lower than most personal investment properties.
When you retire and draw a pension from the fund, both of these are reduced to zero.
You can’t live in or rent out to friends and family, an investment property owned by your SMSF.
You can buy a retirement home through your SMSF and once you retire, draw a pension from the fund and in most cases, transfer ownership to yourself (stamp duty will apply).
If you have a business, you can lease commercial property through your SMSF and your business will be able to claim rent as a tax deduction.
You can also create an SMSF with family and close friends in order to pool your resources and buy more expensive properties.
Your SMSF cannot use borrowed money to improve the property as you will need to use the cash resources of the fund, to make any improvements.
Renovations which return a component back to new condition, are classified as repairs, for the purposes of the legislation around superannuation borrowing.
Property can be developed using your SMSF by setting up special trusts within the SMSF.
You cannot borrow against the property that you are developing, but you can borrow against other assets or use external funds.
There are very stringent rules when using a SMSF for property development, so be prepared to work with advisers to ensure that the development complies with the stringent rules that exist.
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