Investing in your SMSF

Self-managed super funds (SMSFs) are currently a hot topic and investing in property through your SMSF can be a great way to build wealth. But the rules that surround SMSFs mean you may need professional help to make the most of your fund


Before starting an SMSF it is important to consider whether it is the best option for you.

The pros

As an SMSF trustee, you have control over investment strategies and your money. You also have greater choice in regards to the investment opportunities and flexibility surrounding your fund.

By pooling your super with family members or business partners in an SMSF, you may be able to save money to invest more quickly, potentially reaching your investment goals sooner.

The cons

Although SMSFs allow for greater control of your money, there are extra costs associated with this kind of super fund. As a trustee, you will have added responsibilities and legal obligations that you don’t need to worry about when someone else is managing your super fund.

You will need to weigh up the costs of having your fund professionally audited each year, plus ongoing administration costs. You should consider whether the benefits outweigh these additional costs.

Most financial experts suggest that to make the most of your SMSF, you should have at least $200,000 in savings and some financial experience.

Property investing

Purchasing property through an SMSF has some major advantages, one being the diversification it can help bring to your fund.

While people have always been able to purchase property through an SMSF, what has made property more attractive in recent years is that you can now borrow in an SMSF, making the dream of property ownership achievable for more people.

Owning a residential investment property within your SMSF can be significantly more tax-effective than investing in a property in your own name.

However, there are strict rules that govern how you can use your SMSF to invest in property. For example, spending borrowed money on repairs and maintenance is permitted, but spending borrowed money on anything deemed to be an ‘improvement’ is not.

There are also rules that dictate how the property can be used. You won’t be able to use it as a holiday home as no members of the fund can stay at the investment property – even if they pay rent. The penalties for breaking these rules are high and not worth the risk.

If you decide that your SMSF is a good way to get into the property market, there are a few other things you should weigh up first.

As a general rule, you should have your SMSF set up before looking at investment properties. The set-up time can be lengthy and you want to ensure everything is in place before you find that house or unit.

If you have had little previous experience with SMSFs, it is important to seek professional advice. This will include advice on the day-to-day management of the fund as well as agreements with members about how funds will be spent and what would happen in the event of the death or permanent injury of a key contributing fund member.

Investing in property through an SMSF can be a powerful way to build your superannuation. However, it is important to be clear about your obligations and have the time, money and ability to meet them.

Investing in your SMSF
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