Can You Use Your Super To Buy An Investment Property?

Can You Use Your Super To Buy An Investment Property? Discover how to leverage your SMSF for property investment with Star Homeloans.


What is a Self-Managed Super Fund?

You will need a self-managed super fund if you want to invest in property using your super. Unlike regular super funds, SMSFs provide you with more control over your investments. However, great control brings more responsibilities. To set up an SMSF, you have to take on responsibilities as a trustee of your fund. The investment flexibility can be achieved by an SMSF property loan.

Can You Use Your Super to Purchase a Property?

With legislative changes in recent years, there have been different ways used by people to invest in a property through super and many people are now finding out the possibility of using SMSF to buy a property. This method brings numerous benefits. Investing in a property using super can offer various tax benefits.

You can buy the same types of property in an SMSF that you can own in your own name – business real property and residential property. However, there are a few rules when you own a residential property using an SMSF property loan, including:

  • Sole purpose test: the SMSF property investment needs to meet the sole purpose test, which means it must solely offer retirement benefits for the members. You are not allowed to use the property for private use or rent it to family members.
  • Related parties: you can’t buy a residential property with an SMSF from a related party, and you can’t rent that property to a related party.

The other type of SMSF property you can buy using an SMSF is a business real property. This is a commercial property wholly used for business purposes. Business real property has various benefits, including asset protection, tax advantage, and the ability to use your SMSF capital to buy the property.

Is It Worth Using a Super for Property Investment?

In the right circumstances, investing in a property using your super offers various benefits:

  • Buying business real property in an SMSF can offer various tax benefits as SMSFs are tax-effective structures with super funds. If you own your business property in an SMSF and rent it to your business entity, it can be tax-efficient.
  • Property would be the best addition to your investment portfolio, offering diversification and reduced risk. It can be beneficial if your super fund is invested in traditional assets like bonds and shares.
  • SMSFs make you able to use your super savings to help buy an investment property.

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