There is a growing trend in Australia, people working hard and smart, moving their savings and superannuation money, into a Self-Managed Superannuation Fund (SMSF), for retirement. Having savings and money to invest, to give best growth and returns, SMSF operators (trustees, who also are the beneficiaries), look to property as an investment option inside the SMSF.
As seen in our previous articles, property is a popular class of investment for Australians and as such, keen to put their superannuation money into property, with the property when purchased, going into their SMSFs. There are stringent rules and regulations for SMSFs, heavily regulated and compliances, governed by the Australian Taxation Office (ATO), putting property into SMSF, which includes –
- Must meet the ‘sole purpose test’ of solely providing retirement benefits to fund members
- Must not be acquired from a related party of a member
- Must not be lived in by a fund member or any fund members’ related parties
- Must not be rented by a fund member or any fund members’ related parties.
Also, your tax accountant, would advise you, if property investment is best for you, outside the SMSF, for example, to get the negative gearing benefits. They will also discuss with you, on the two property investment options (direct or SMSF), considerations for capital gains tax, property related expenses, tax depreciation benefits, buying, holding and selling costs. Very important, to get your financial planner involved as well, which most financial planners are also mortgage brokers as well. They also advise you with the tax accountant, on the two property investment options (direct or SMSF), and the loan mortgage products available. A SMSF Protection Caveat is also something to consider on title.
Word of warning if you are looking to put your own home into your SMSF, you cannot become your own tenant, as per the above rules. Furthermore, you can lose your principal place of residence exempt, with annual land tax assessments, by the state’s revenue authority. This is where your tax accountant needs to advise you. Your financial planner also needs to advise you, if permitted by your current bank/lender or not. If you are looking to put your own home into your SMSF, then you must move out and turn it into an investment property, with a tenant, not related directly to you. Most likely, you require bank / mortgagee consent as well.