SMSF Borrowing

“On average, a property held within Super for 20 years will be 35% more profitable than one held in your own name”. (SMSF magazine, Winter 2009)

If you’ve been bruised by the volatility in the share market in the past year then property may be looking like a more attractive option than shares. Whilst you may have been accumulating property outside of super and benefiting from gearing strategies, changes in legislation now mean you can gear property within your self managed super fund.

Of course you will need to carefully consider your ability to undertake borrowings inside your super fund but if the strategy is deemed appropriate based on your personal circumstances you could benefit in a number of ways.

Benefits of gearing property within an SMSF:-

• Accelerated wealth accumulation through borrowing
• Greater flexibility – SMSF’s can better tailor investments to suit member needs
• Investment returns will be accumulated in the concessionally taxed superannuation environment.
• Capital Gains Tax can be minimised or eliminated if the property is sold after the fund has commenced to pay a pension
• Increase your cashflow by taking responsibility for costs relating to maintaining a property throughout the year.
• There may be long-term benefits for small business owners to hold business premises within their SMSF as opposed to holding them outside super
• It’s an opportunity to diversify a super portfolio and therefore reduce the overall volatility and risk on the portfolio.
• The potential to utilise traditional negative gearing strategies to generate tax-effective income.
• Protection from creditors in certain circumstances under Bankruptcy Laws

It’s important to understand that SMSF Loans are different to normal home loans due to the superannuation legislation that they are linked to. The structure, process and tax implications of such a strategy can be complex and it is important you understand the costs and benefits to your personal situation before proceeding.

That’s where we come in!

David Powell and David Baruffi have been providing financial planning advice in the SMSF area since 1993 and became SMSF Specialist Advisors™ in 2007. They have been researching the SMSF borrowing changes continually since their heralding in early 2007 and have already helped numerous clients to take advantage of these opportunities.

Find out if SMSF borrowing is right for you and talk to a specialist. Call us today on (08) 9423 0300 or complete the contact form to arrange an appointment.