Almost all Australians are familiar with term superannuation which is simply a long term savings for comfortable and secure retirement. And many are becoming very interested in SMSF (self managed super fund). While superannuation is managed by fund managers or other professionals, SMSF, very similar to the superannuation, is managed by its own members. One of the newest SMSF trends is buying properties through self managed super funds. And the reason SMSF investing in property is becoming popular is because the costs are reduced and the rental returns are available.
Buying property inshore or offshore such as buying property in USA is a great idea and the benefits are many. However, there are also many rules, so it is recommended to get some advice before buying your property in the USA. Take a look at the main advantages and disadvantages of buying property trough SMSF.
Advantages
If you purchase a property with your SMSF and if you hold the property until you retire, you will not pay tax on your profits regardless of whether you sell or rent your investment;
All your earned profits and rent income earned through your SMSF are taxed at 15%. In case you have a property for more than one year, you will pay only 10% on capital gains;
You have total control of your super investments;
Disadvantages
If you borrow money to buy a property through your super, the income tax is valid only for the income acquired within the fund (not your typical income);
The fees and the set up coasts can be high when getting a loan trough your SMSF;
You cannot live in the purchased property nor your family or friends;
If you’ve bought a property trough your SMSF which is still under a loan, you can not renovate it;
As we said above, the fees and penalties for wrongly managing the fund are huge, so it is good for you to seek professional help.
Generally speaking, buying property trough your SMSF is an excellent way to invest in your retirement, but probably more appropriate for people who are far away from retirement (20 – 25 years away). They have more money on their disposal and can probably hold the property even after retirement to benefit from huge tax savings. However it is, before making this step, take into account your financial situation and needs and seek professional advice.