Self-managed super funds (SMSFs) provide an environment for saving for your retirement. However, the difference between an SMSF and other types of funds is that the members of an SMSF are usually also the trustees. This type of fund may offer significant cost and tax advantages, greater control and flexibility over the investments, as well as the ability to have a tax effective borrowing structure. However, with these advantages comes the responsibility of complying with the super and tax laws, and HKS planners are well placed to assist you every step of the way.
SMSF Services at HKSFP includes:
We are very pleased to have an association with Hoffman Kelly Chartered Accountants that allows for the smooth processing of all your SMSF needs, from the establishment of the self-managed super fund, including the set up of the Trust Deed, to receiving detailed advice on the obligations of Trustees and Directors.
Hoffman Kelly can also assist with the ongoing administration of your SMSF, including reporting, arranging for your fund audits and taxation requirements.
SMSF and Property Investment
Thinking of setting up a Self Managed Super Fund (SMSF) to buy an investment property through your super?
Property investment within an SMSF can be set up for both residential and commercial purposes and can be a great way to build up your retirement savings, but the investment strategy may not suit every circumstance. A few rules that must be considered when purchasing property in an SMSF are:
- The fund member or any related party of the member cannot be a resident of the property.
- The property cannot be acquired from a related party of the member and must not be rented by a fund member or any related parties.
- The property cannot be used as a holiday home.
- Must meet the ‘sole purpose test’ and therefore should be purchased solely for investment purposes.
Here are a few general pros and cons to be aware of:
FAQs – SMSF and Property Investment
Am I able to borrow to purchase a property in a self-managed super fund?
Yes, many banks provide loans to be able to purchase a property within an SMSF of up to 80 per cent of the property value. Our lending specialist of HKS Mortgage Broking can assist you in comparing loan products on offer and manage the process through to settlement. Remember that our services come at no extra cost to you!
What potential tax benefits apply when owning a property inside an SMSF?
Rental income and any capital gains earned from an investment property is taxed at 15 per cent. This rate drops to 10 per cent for capital gains tax after the first year of ownership. There is no capital gains tax payable on the sale of a property in pension phase.
Do I pay the mortgage and other expenses of the property?
No, the SMSF is responsible to cover all costs relating to the property such as rates, interest, maintenance fees, body corporate fees, and any other fees imposed by the property. The SMSF also pays for all deposits on the investment property. All expenses are generally tax deductible to the fund.
What about land tax?
As the SMSF is the beneficial owner of the property, the SMSF is responsible to pay the land tax (if applicable).
Am I able to purchase a property before my SMSF is set up?
No, the SMSF must be completely set up prior to purchasing a property.
Am I able to purchase my business premises in my SMSF?
Yes, you are able to purchase a business property through your SMSF and then rent it back to your business. This strategy has proven to be beneficial for many business owners as the rental costs are used to build their super.
What happens if I can’t pay the loan for my property held inside the SMSF?
Loans on a property held inside an SMSF are non-recourse. In the event that a loan defaults, the lender only has a right to the property itself and cannot have access to any other asset held in the SMSF.
Can I claim depreciation inside a SMSF?
Yes, you are able to claim standard deductions such as depreciation inside an SMSF.