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Buying investment properties has become increasingly common during the last couple of years. In 2007, the law in Australia allowed people to purchase investment properties through their self managed super funds which has made property investing even more popular.
As these purchases imply a wide range of complex and overall complicated features, everything should be carried out attentively, to make everything according to the law. Now, let’s get acquainted with the main advantages that come with SMSF property investments.
Control
To begin with, the fundamental advantage of SMSF property investments is control. Such an investment allows you to regulate where you wish your retirement fund to be invested. For instance, when it comes to industry super funds, they aim at investing your finances in a range of different investments that are equally suitable and profitable. In this view, you should know that your personal finances can vary by the type of assets your particular fund is invested in. Consequently, you may consider choosing which properties you wish to invest in while having the opportunity to alter your portfolio as you please.
A 15 percent tax
Before retiring, you will be required to pay an appreciative tax of 15 percent out of your total gain. Additionally, if you keep the property for longer than 12 months, you may benefit from a 10 percent tax, that means a 5 percent tax decrease.
Zero tax after retirement
If you succeed in maintaining your property after retiring, another significant benefit is that you won’t be required to pay any taxes in case you decide to sell or rent the property.
While the enumerated advantages might be convincing, still there is a wide range of possible pitfalls that shouldn't be omitted. Let’s take a look.
Your tenants cannot be friends or relatives
You cannot rent your SMFS property to any of your relatives or friends. In this view, your property should be arm length
You are not allowed to make major renovations
If you’re thinking about renovating your SMFS property, you should think twice. This particular aspect is not allowed. Only small repairs are approved. You cannot make major renovation and additional property enhancements.
Pricey and complex establishment
The main drawback to an SMSF property is that its set-up process is utterly pricey and complex. You will undoubtedly necessitate the assistance of a professional. In this view, figuring loans with your bank, or perhaps considering the help of a financial advisor will aid you to compare and contrast the most favorable home loan rates. Besides the fact that you will require professional help, in worse case scenario your set-up forms don’t meet the law’s requirements, there is a wide range of severe penalties. Multiple forms and checks need to be thoroughly analysed. So, you don’t afford to make any mistake.
Consequently, make sure you get acquainted with every detail concerning the complicated procedure before proceeding to adapt your super into a self-managed fund.
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