Investing In Property Through Your Super, Is This The Strategy For You?
There are now approximately one million Australians that are invested in a Self-Managed Super (SMSF) Fund. Members around the country are leveraging from the benefits available through SMSFs. While a SMSF may not be suitable for everyone, many Australians have discovered that investing in direct property within their SMSF can offer substantial savings through tax advantages and access to a larger pool of funds.
The Benefits of Purchasing Direct Property Through Your Super
- Tax Savings – By using your super to purchase an investment property, the property income will only be charged a maximum tax rate of 15% and capital gains tax is reduced to 0% when you sell the property in pension phase
- Deposit – Utilise your existing super balance to fund the deposit for the property
- Leverage – You can borrow up to 80% of the value of the property
How it Works
Through a Self Managed Superannuation Fund (SMSF) you can utilise your existing superannuation (super) balance as a deposit into direct property and as of 2007 you can even borrow through your super.
Example of Financial Benefit
Husband and wife in their early 40’s earning combined income of $200,000 and $200,000 in super*
|PURCHASE DETAILS||OUTSIDE SMSF||INSIDE SMSF|
|Purchase Price (Investment Property)||$400,000||$400,000|
|Total Income Needed To Fund Deposit (Factoring In Income Tax)||$190,476||$141,176|
|Loan (15 Years)||$280,000||$280,000|
|Total Loan Repayments (15 Years At 6% Interest Rate)||$ 425,340||$ 425,340|
|Total Income Required To Meet Loan Repayments (Factoring In Income Tax)||$675,143||$500,400|
|Total Cost Difference||+$224,043|
|Property Value (15 Years At 5% p.a.)||$831,571||$831,571|
|Total CGT Difference||$104,760||$0|
|Total Potential Financial Benefit (if property is sold in pension phase after age 60)||+$328,803|
To learn more and find out whether this is the right strategy for you, simply contact us about our complimentary obligation free appointment.
*Please note that these are rounded and example numbers, not exact figures. Personal, market and legislative factors and changes will have an effect on your outcome. It is recommended you seek personal specific advice for your situation.