Superannuation Supercharged: An SMSF Explained

A self-managed superannuation fund or the SMSF is the largest sector in the superannuation industry. Thousands of people set up SMSF accounts every year. Though depositing in a superannuation fund is obligatory, Australian citizens can choose which scheme they want to invest in, and most of them turn to an SMSF.

Of these people who engage in SMSF, many of them invest in property after gaining the funds. In particular, with the recent changes in SMSF regulations, people can now buy properties that would otherwise have been beyond their financial means.

The Power Of SMSF

When you invest in a property through the SMSF, you can:

• Invest in any type of property or in any sector including a vacant plot, a residential space, commercial space, office space, medical suites and factories.
• Buy a business lot. The only catch here is that the premises must be used solely for business purposes.

The Benefits Of SMSFs

Along with the freedom to invest the money in any way in any property, the SMSF also offers home investors certain benefits such as:

• A drop in CGT if the asset bought through the SMSF sells after a holding period of one year. In fact, the Sentinel Property Group explains, if the sale happened during the pension phase, the CGT is zero.
• It allows you to borrow for buying property. In such a case, the property is on trust so that the fund gets a beneficial interest. Furthermore, the rights of the lender against the fund holder for defaults in repayment pertains only to the asset.
• For those with a significant capital build-up in superannuation.
• For small business owners as they can conduct business on the premises.

Some No-No’s Of Smsfs

Still, even with an SMSF’s benefits, there are some caveats when using the funds. For instance, you must not:

• Use the amount to make any personal loans to others.
• Use the money for financing a business under your name.
• Access it before retirement.
• Buy a residential property from a fund member.
• Allow others to live in the property owned by the fund.

Take care to keep these few points in mind and the SMSFs can benefit you greatly when buying a property. The elderly in particular can now live in their own homes or buy a property for posterity, thanks to the SMSF.