SMSF Finance – A Tangible Property Investment Solution
In addition to capital gains, an SMSF investment can bring numerous financial benefits that include:
- Lower capital gains tax (CGT)
Generally, this tax is capped at 10% as long as the gains are from the use of SMSF. The tax can even drop to 0% if the member/trustee starts a pension.
- Fast growth of retirement savings
Your income and capital growth are funneled into your SMSF, making the overall growth of your super extremely fast.
- Quick payment of SMSF loan
Income and contributions coming from the property are channeled into loan payments.
- Reduced tax on contributions
Loan interests are considered SMSF tax-deductible. This reduces the tax liability of your SMSF.
- Opportunities of buying commercial premises for business
Buy business properties using your SMSF account. You can then rent properties to a related party.
- Provision of retirement income
Upon property ownership by your SMSF, use your rental income to pay your pension payments.
Things/Issues to Consider
There are lots of benefits that you can get from starting an SMSF. However, take note of possible issues that can arise from having an SMSF.
- You must be clear about risks. As with other types of investment, obtaining a loan to buy a property comes with significant risks that must be clear to you from day one.
- Read the fine details of your SMSF trust deed. It must explicitly state that you can borrow money from a third-party lender to invest.
- Ensure sufficient SMSF cash flow to support loan repayments (personal contributions, employer contributions, etc.)
SMSF loans incur initial and ongoing costs. Consider these costs carefully before deciding to take out a loan.