You can now borrow to purchase an Investment property using your Super funds.

Recent changes to superannuation law means that self managed superannuation funds (SMSF) are now permitted to borrow money. New section 67(4A) of the Superannuation Industry Supervision (SIS) Act allows SMSF’s to borrow to invest in limited circumstances. The limits are:

1. The borrowed money must be applied to the acquisition of an asset the loan must be a limited recourse loan, so the lender’s security is limited to the assets bought using the loan and in particular doesn’t extend to other assets of the SMSF
2. The asset must not be an in-house asset or other asset not permitted under the superannuation law e.g. a loan to a Member or property acquired from a Member.
3. The asset must be held on trust for the SMSF so that the SMSF has a beneficial interest in the asset.
4. The SMSF must have a right to legally acquire the asset on payment of one or more installments.

Benefits of using your Super Funds to buy an investment property

• Maximum of 10% capital gains on the sale of the property (held after 12 months)
• Zero capital gains if sold after retirement.
• Maximum of 15% tax on rental income received and 0% tax for rental income received after retirement.
• By salary sacrificing into your SMSF you effectively receive 100% tax deduction at your full marginal rate of tax contributions (may be subject to 15%).
• Interest and other expenses relating to the property is fully tax deductible within the super fund if the property runs at a loss it could mean your salary sacrificing contributions will reduce to nil tax.
• You can use your tax deductible contributions to make principal and interest repayments, you are effectively using pre-tax dollars to make principal repayments which means you could potentially own the property much sooner.
• Asset Protection

Self Managed Superannuation Checklist

1. Complete Due Diligence process – decide how much to borrow, what to buy
2. Establish the benefits & any disadvantages, what if I buy under different entities?
3. Have your Life Cover assessed
4. Setup Self Managing Super Fund (SMSF)
5. Ask your existing super fund to rollover your super funds to SMSF.
6. Setup Instalment Warrant Trust with Trustee company (Bare Trust).
7. Locate property for purchase & loan must be a limited recourse loan. (This is where Evergreen and Brown can assist).
8. Conveyancing Solicitor must be advised that the property is to purchased in the name of the Property Trustee.
9. Use 9% employer contributions and salary sacrifice to pay for the shortfall (the expenses after rental income) also the principle of loan if possible.
10. Compliant with Australian Taxation Office and ASIC

We Can Help You Setup Your SMSF & Trust