There are significant advantages to having a property in an Self Managed Super Fund (SMSF) with the most obvious being the tax rate for income derived in your super fund being taxed at a considerably lower rate than income tax (namely 15%) as well as the choice to control your investments and your future investment strategy.
SMSF’s are able to borrow funds via what has been defined by Superannuation legislation as a “Limited Recourse Borrowing Arrangement “(LRBA) which describes a loan/arrangement which has a limited recourse for the lender against the borrower in the event of default, to the single asset purchased using the specific LRBA – thus protecting the other assets that sit inside the SMSF.
Each asset purchased using an LRBA must be housed inside what is known as a “Bare Trust”
Investing in property within your SMSF isn’t for everyone (it may limit for instance the asset class weights inside the fund and thus create unnecessary risk – in other words, illiquid assets such as property may not be appropriate for your risk profile but, if you want to review the opportunity then the following key issues need to be considered:
Download this handy guide that the team at Intuitive Finance has put together for you.