Setting up an SMSF for property
Once you have set up your SMSF you can then consider using the fund for property investment. However, before you can do this you will need to carry out some more procedures. These are as follows:
1. Establish a legal entity.
2. Open a bank account with the tax file number and Australian Business Number in the SMSF name.
3. Complete a benefit rollover statement to transfer other super funds into the SMSF.
4. Find property, if property is your preferred investment.
5. Establish a bare trust and corporate trustee. The fee can be paid by the SMSF.
6. Arrange finance using the bare trust as the legal entity.
8 Reasons to Use Your SMSF for Property Investment
Property investment comes with many benefits, especially in terms of income generation in retirement. The top five reasons to use your SMSF for property are as follows:
1. You diversify your assets and reduce your risk in a market down turn.
2. Property is unrelated to your other super investments. SMSF business and residential property can give you tax, business and asset protection benefits and allow you to save for retirement.
3. Property has a strong and stable return and is a defensive growth asset. SMSF investment properties, at times, can generate higher net yields than property held under your name. This, of course, depends on variables such as, capital growth, gearing level and negative gearing tax breaks
4. Capital gains are waivered when your SMSF sells an investment property and is paying a superannuation pension.
5. Other tax benefits. During the SMSF saving phase, capital gains and rental income is taxed at a concessional rate
6. The superfund pays the deposit for property investment and it also assumes the debt associated with the property.
7. The bank who loans your SMSF the funds for the property investment, recovers the debt from the superfund.
8. Property investment is not as volatile as other investments, such as the share market, so this minimizes your risk. Careful planning of your SMSF can prevent you becoming the victim of an "over geared" and "poorly diversified fund."
Any advice provided in this publication should be considered General Advice as it does not take into account your personal needs and objectives or your financial circumstances. You should therefore consider these matters yourself before deciding whether the advice is appropriate for you and whether you should act upon it.