As more and more investors are choosing to manage their own superannuation through Self-Managed Superannuation Funds (SMSFs), the opportunity to invest directly in property is becoming available to more people. And it’s not surprising that interest in owning property through SMSFs is on the rise due to the attractive benefits of doing so. Read on to learn more.
The advantages of owning property inside of an SMSF include:
1. Lower Capital Gain Tax (CGT) – Whilst property investors who are eligible for the capital discount must pay CGT at half their applicable income tax rate (which means 17.5% or 22.5% CGT for most property investors), property investors who invest inside their SMSF generally have their CGT liability capped at 10%. That’s likely to be a significant saving for long-term investors.
2. Rental income builds the value of the SMSF – As the rental income is received within the SMSF, it accelerates the growth in the SMSF’s value, and also creates opportunities to leverage growing cash reserves into additional property investments.
3. Regular income – Once your SMSF has bought the property outright, all the rental income can be used to fund pension payments.
4. Contributions to your SMSF can be used to pay off the property – This allows for a faster repayment period.
5. Lower tax on contributions – Since loan interest is tax deductible, your SMSF’s tax liability can be lowered through direct property investment within the SMSF.
Landen’s Director Jim Dionysatos is seeing growing interest in direct property ownership with SMSFs as the above-mentioned benefits are becoming more widely understood:
‘The advantages of owning property with an SMSF are strong. Our clients who are going down this path are often paying off their investment loan on their first property in a matter of years, and are leveraging their growing credit strength with multiple property purchases. It’s an investment strategy which can result in strong financial outcomes and may lead to greater freedom during the retirement years.’
