Is Using Superannuation to Buy Investment Property a Smart Idea?


While there are a number of ways to approach property investment, many people look at using their superannuation to buy property and grow their portfolio.

Back in 2007, changes to superannuation legislation provided trustees of self-managed super funds (SMSFs) the opportunity to borrow for the purpose of property investment. The Limited Recourse Borrowing Arrangement now makes it possible to acquire single assets by using your super to borrow from a lender.

But just as with any investment strategy, using your superannuation to invest in property can be successful for some, and not for others.

There are also a number of rules outlined by the Australian Securities and Investments Commission (ASIC) that need to be followed, which can add another layer of complexity to reaching your financial goals.

Let’s break it down easily, and explore how using your super to invest in property can work for you.

Who Can Use Super to Buy an Investment Property?

  • Trustees of self-managed super funds (SMSFs)
  • Trustees of some retail, corporate and industry superannuation funds. Options will vary depending on your fund, so always check the fine print as heavy fines do apply.
  • Ideally, those with more than $200,000 in order to pay liabilities and pension payments if a fund member receives one.

The Benefits of Using Your Super for Investment Properties

To begin with, you’ll enjoy tax breaks, since your super fund will be taxed at 15%, which is far lower than personal tax rates.

In addition, if you sell your property while your SMSF is in pension phase, the sale is tax-free. Alternatively, if you sell your property during the accumulation phase, the capital gains tax is calculated at a discounted rate.

What Restrictions Apply to Me?

Under ASIC law, you won’t be able to use your super to buy a property you intend to live. There are also restrictions on who you can rent to, prohibiting family members and fund members from living in the property.

Things to Consider

There are plenty of things you’ll need to consider before you begin investing in property with your super. Ensure you’re prepared by asking yourself:

  • Do I have enough superannuation to both live off come retirement and fund a new investment property?
  • Do I have enough cash flow to both make repayments from my super and grow my super fund?
  • Can I afford the tax losses from the property, which can’t be offset against my taxable income?
  • Am I willing to forego altering the property, which can’t be made under ASIC law?

Our property investment consultants at OpenCorp can also answer your questions around super and property investment. Contact us today with all your concerns and we’ll sort you out!

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