Property + Your Self-Managed Super Fund
Canny Group
REAL PEOPLE. REAL WALKS OF LIFE. // Accounting // Advisory // Legal // NDIS Plan Management
Did you know that with a?self-managed super fund, you can purchase commercial or residential property inside the super fund?and?this can provide many tax benefits?
Did you know a?self-managed super fund?can borrow money from a financial institution to buy a property?
Owning a commercial property in a?self-managed super fund?provides a plethora of benefits.?The commercial premises can be leased to the members for their business.?This strategy allows the business to be able to claim a tax deduction for the rent in their business all while growing their superannuation for their retirement years.
Direct held property makes up approximately 19% of all?self-managed super funds, indicating many SMSF trustees consider it as an important and significant part of a diversified portfolio – the proof is literally in the numbers.?There are numerous strategies and ways for property to form part of a?self-managed super fund’s?investments and each must be carefully considered.
WHAT IS A?SELF-MANAGED SUPER FUND?
A?self-managed super fund?is simply a type of superannuation fund.?It is a superannuation trust structure that provides benefits to its members upon retirement.?The difference between an?SMSF?and other types of funds is that the members of a?self-managed super fund?are also the trustee and a?self-managed super fund?is established to provide retirement benefits to its members.
Entering into retirement is one of the biggest life changes that will happen to us throughout our lives.?With a?self-managed super fund, you have complete control over your biggest asset that you have worked towards your entire life.
A?self-managed super fund?can have between 1 – 6 members where each member acts as trustee of the fund or if there is a corporate trustee, each member acts as director of the company.?Therefore a?self-managed super fund?is well suited to individuals, couples and families.?All members of the?self-managed super fund?must be trustees, and all trustees must be members.
Self-managed super funds?are ideal for those who like the control and flexibility that comes with running their own fund and making their own investment choices.
FINANCIAL ADVISORY SERVICES: INVESTMENT STRATEGY FIRST!
Before any investment decisions, it is imperative as well as a legal requirement, that you as a self-managed super fund trustee, must consider your investment strategy.
Your strategy should detail such things as how much exposure you would like to the property market, the form of exposure and how appropriate it is for your current circumstances.
A well-well diversified portfolio is essential to provide income for retirement and spread investment risk so that any single asset class, such as property, does not dominate your?self-managed super fund?risk and returns.
INVESTMENT MANAGEMENT ADVICE FOR: DIRECT INVESTMENT
A common form of property exposure is a direct investment into a property.?This can be in the form of either a residential property or a commercial property.?When purchasing a property with a?self-managed super fund’s?cash there are some important considerations that must be worked through, including:
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CONSIDERING YOUR FINANCIAL GOALS VIA: LIMITED RECOURSE BORROWING ARRANGEMENTS (LRBA)
Self-managed super funds?may also invest in property through limited recourse borrowing arrangements (LRBA).
These are complex borrowing structures which allows SMSF trustees to take out a loan from a third party lender.?The?self-managed super fund?trustee then uses these funds to purchase a property to be held in a trust.?The lender only has recourse to the property held in the trust – this is why the loan is “limited recourse”.
A limited recourse borrowing arrangement should only be utilised when it is the right structure for your?self-managed super fund?on the basis of?SMSF Specialist Advice.
Some very important considerations in addition to the ones above include:
INVESTMENT ADVISORS FOR YOUR: INDIRECT INVESTMENT
Another way to gain exposure to the property for?self-managed super funds?is through indirect investment.
This can include listed investment vehicles such as listed investment companies and exchange traded.?Managed investment trusts are also a common investment for?self-managed super funds?to gain exposure to property.
Investing directly may suit your?self-managed super fund?needs more than a purchase of a property because it is relatively simple and most likely will not require a large amount of capital.?It also allows your?self-managed super fund?to get exposure to large value properties such as office blocks, shopping centres and industrial property that would otherwise be out of reach.
Investing in these products should be accompanied by?self-managed super fund?specialist advice from our?Advisory Team?and seeing our very own?Self-Managed Super Fund Specialist, Helen Yau.
Canny Advisory + Your SMSF Advisory Needs
Having an?SMSF Specialist Advisor, like our very own Helen Yau, can help you understand how the different forms of property investment may or may not be relevant for your?self-managed super fund?portfolio as well as the impacts that it may have on both you and your?SMSF.
If you would like to learn more on?self-managed super funds?or if you are well established in your self-managed super fund?journey but would like to have a chat with our team about your options for direct held property?get in touch?so we can find out how we can help you make the most of your SMSF.