OFFSET: If the property is negatively geared and makes a tax loss, you can use this to offset other income in the fund. If your employer is contributing to the fund, any loss from negatively gearing the property will reduce the superfund’s taxable income, and reduce the tax payable.

PENSION: A member who is drawing a pension may be able to gain a tax exemption on the income of the superfund. This includes rent and capital gains.

PLANNING: With proper tax and super planning, a member can significantly reduce the tax on any property gains over time.

RESIDENTIAL: Definitely not – not even if you pay more than the market rent. You are not allowed to benefit in any way from the fund’s assets, which means you can not lease the property from the fund.

COMMERCIAL: Absolutely. It’s a common strategy for business owners to purchase a commercial property in their SMSF, and rent it back to their business at commercial rates.

PROS:

If the property is negatively geared and makes a tax loss, you can use this to offset your fund’s other income.

Depending on your SMSF balance, you may pay no tax if you sell or rent the property after you’ve retired and your super goes into the pension phase.

And before retirement, capital gains and rent earned by your SMSF are taxed at only 15%. Hold the property for more than a year, and this will drop to just 10%.

You have direct control, and a real understanding of where your money is being invested.

Your portfolio is diversified, for your protection in a tough market.

CONS:

Any tax offsets through negative gearing only apply to other income earned within the fund – not your regular income.

You can’t live in the property and neither can any friends or family members.  

You can’t renovate a property purchased through a SMSF while it is still under a loan.

There are additional setup costs and lenders often charge higher fees for SMSF related loans.

Running an SMSF can be complicated with high penalties for getting things wrong. However, ABA are experts in SMSF tax and compliance to ensure you avoid any issues

Before 2007, this was not possible. However, superannuation laws have changed since then, and you can now use your SMSF to borrow money in order to purchase an investment asset, as long as a strict set of rules are followed.  Under the current superannuation borrowing rules, an SMSF can borrow money to buy any type of asset permitted by the superannuation law. The rules don’t restrict the type of asset that can be purchased, but SMSF’s are primarily used to borrow money to purchase investment properties. This is due to the requirements of Limited Recourse Borrowing Arrangements (LRBAs).

SMSF loans are written with a strict set of rules known as a Limited Recourse Borrowing Arrangement (LRBA). It is becoming increasingly popular to borrow from a SMSF to invest in residential and non-residential property, and the rules of a LRBA ensure that the investment is held in trust for the borrower’s future. SMSF loans are described as ‘limited recourse,’ because if the loan defaults, the lender is limited to seeking compensation through the specific asset bought with the loan, and there is no recourse to the other assets held in the SMSF.

Sometimes referred to as a Simple Trust or Naked Trust, a Bare Trust is one of the most basic types of trusts, and it operates differently from other trust. Usually, a trust’s income accumulates and becomes part of the its capital – but this is not the case for a Bare Trust. The person receiving property – the beneficiary – is entitled to the income and the capital of the trust. The income is the amount that the property earns while it is held in trust, while the capital is the value of the property in the trust. In a Bare Trust, the beneficiary decides when they will take ownership of the property, unlike a Discretionary Trust, in which the trustee determines when the beneficiary will come to own the property.

You Get:

• Reliable, scalable and secure SMSF Administration Software
• Total control over fuelling your SMSF growth.
• Fully integrated property valuations
• 180+ automated data feed
• Fully integrated actuarial certificates
• Automated Dividend, DRP & Complex Corporate Actions
• Track contribution caps & pension limits
• Calculate CGT & Income Tax
• Continuous back-up & 99.7% Uptime
• Daily balance reconciliation of cash & holdings