💰 "Investing in Property with Your SMSF: It's Like Monopoly, But Real"

Buying Property through a Self Managed Super Fund

Superannuation: the treasure chest you can’t touch until you’re old enough to forget where you buried it. But what if you could take control now and even buy property with it? Enter the Self-Managed Super Fund (SMSF), your super's rebellious cousin who doesn't play by the usual rules.

🤔 What is an SMSF?

A SMSF is a private superannuation fund that you manage yourself. Unlike traditional super funds, where someone else makes investment decisions for you, an SMSF lets you choose your investments and manage the fund's operations—provided you comply with the regulations set by the Australian Taxation Office (ATO). Think of it as the DIY version of superannuation, but with more paperwork and fewer chances to burn yourself.

🏠 Investing in Property Through Your SMSF

One of the key attractions of an SMSF is the ability to invest in property. However, purchasing property through your SMSF is subject to strict rules:

Investment Purpose: The property must be purchased solely for investment purposes. You can't live in it or rent it to family members. So, no moving in and pretending it's a "holiday home."

Arms-Length Transactions: The property must be acquired at market value from a third party, not from related parties, unless it's a commercial property used for business purposes. No buying your mate's overpriced shack just because he owes you a beer.

Limited Recourse Borrowing Arrangements (LRBAs): If your SMSF doesn't have sufficient funds to purchase a property outright, you can borrow money through an LRBA. This arrangement allows the SMSF to borrow funds to acquire a property, with the lender's recourse limited to the property itself in the event of a default. However, LRBAs come with their own set of rules and considerations, including higher deposit requirements and interest rates. It's like getting a loan, but with more hoops to jump through.

Property Holding Structure: The property must be held in the name of a bare trust, with the SMSF as the beneficiary. This structure ensures that the property is held separately from other SMSF assets and complies with superannuation laws.

Considerations Before Establishing an SMSF

Costs: Establishing and maintaining an SMSF can be costly. Expenses include setup fees, annual audits, accounting, and legal fees. It's essential to weigh these costs against the benefits of having greater control over your superannuation investments. Remember, it's not just about the property; it's about the paperwork too.

Compliance: As a trustee, you are responsible for ensuring the fund complies with all superannuation laws and regulations. This includes maintaining proper records, lodging annual returns, and ensuring investments meet the sole purpose test. It's like being the captain of a ship—you steer, you clean, and you make sure no one falls overboard.

Time and Expertise: Managing an SMSF requires a significant time commitment and a certain level of financial and legal knowledge. It's important to assess whether you have the necessary resources and expertise to manage the fund effectively.

How We Can Assist You?

At Besari Finance, we specialize in providing tailored mortgage solutions to help you achieve your financial goals. While we can't offer advice on whether establishing an SMSF is right for you, we can connect you with trusted professionals who specialize in SMSFs and can provide the guidance you need.

Once you've set up your SMSF and are ready to invest in property, we can assist you with the lending process. Our team has experience in facilitating SMSF property loans and can help you navigate the complexities of securing financing for your investment property.

Ready to Take the Next Step?

If you're considering an SMSF and property investment, don't navigate the complexities alone. Contact us today to schedule a consultation with Sam. We'll guide you through the process and ensure you're on the right track.

Andrew Nott