Compare investment property super funds

Learn how you can start planning for your retirement. RateCity compares superannuation products from 100 Australian Superannuation funds. Compare investment property superannuation funds . - Data last updated on 31 Mar 2019

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SMSFs are becoming an increasingly popular choice for future retirees. They offer an alternative to traditional superannuation accounts where you park your money until you retire. 

SMSF accounts put financial control back into the hands of the account owner. And as an SMSF account owner, you can decide how your money is invested. 

This power extends to purchasing investment properties using your SMSF. There are different ways this can be achieved, and it’s always best to consult a financial adviser if you’re unsure how.

However, if you have an SMSF account you’re in a position to buy either a residential, commercial or industrial investment property with or without the support of a mortgage from a lender.

Whether or not you need to borrow money depends on your SMSF balance. And if you do need a loan, there are some rules and regulations around how this is done. 

You’re free to choose the type of investment property you want, and the location – as long as your choice is a legitimate investment and can guarantee a return for the fund. 

Are there rules around purchasing property using an SMSF?

Buying an investment property using your SMSF is a straightforward enough exercise if you understand and adhere to a few basic rules. 

First of all, the investment property under consideration must pass the ‘sole purpose test’ – that is, be for the sole purpose of providing retirement benefits to the fund. 

The sole purpose test must also be met in order for the property (investment) to be eligible for the tax concessions normally available to super funds. 

The property must be bought and sold at market value (this is the ‘arm’s length rule’). This generally means that the property cannot be purchased or sold to individuals related to the fund in any way. 

It’s also important that any SMSF members (trustees of the fund) don’t have use of, or access to, the assets of the SMSF.

Your fund will run into trouble with the ATO if it’s found to provide a pre-retirement benefit to someone – for example, if someone is using the fund asset for personal use.

A measure of the ‘sole purpose test’ is whether the income generated by your fund’s assets shows a true market rate of return. 

The benefits of buying property through your SMSF

There are several potential benefits to buying an investment property as part of your SMSF portfolio. For example, it can be a means of accessing cash that you might not have available outside of super to buy property.

If you wanted to combine your superannuation with another family member, you could set up an SMSF in order to get into property investments. 

An investment property also presents an opportunity for tax concessions. You might have the option of salary sacrificing additional income to super to pay off the loan quicker from pre-tax dollars. 

And if you hang on to your investment property until retirement, you won’t pay tax on the rental income thereafter or capital gains tax if you decide to sell.

FAQs

The value of your assets affects whether you can qualify for the age pension – and, if so, how much.

The following assets are exempt from the assets test:

  • your principal home and up to two hectares of used land on the same title
  • all Australian superannuation investments from which a pension is not being paid – this exemption is valid until you reach age pension age
  • any property or money left to you in an estate, which you can’t get for up to 12 months
  • a cemetery plot and a prepaid funeral, or up to two funeral bonds, that cost no more than the allowable limit
  • aids for people with disability
  • money from the National Disability Insurance Scheme for people with disability
  • principal home sale proceeds you’ll use to buy another home within 12 months
  • accommodation bonds paid on entry to residential aged care
  • any interest not created by you or your partner
  • a Special Disability Trust if it meets certain requirements
  • your principal home, if you vacate it for up to 12 months
  • granny flat rights where you pay more than the extra allowable amount

For full pensions, reductions apply when your assessable assets exceed these thresholds:

Category

Home owners

Non-home owners

Singles

$253,750

$456,750

Couples living together

$380,500

$583,500

Couples living apart due to ill health

$380,500

$583,500

Couples with only one partner eligible

$380,500

$583,500

For part pensions, reductions apply when your assessable assets exceed these thresholds:

Category

Home owners

Non-home owners

Singles

$550,000

$753,000

Couples living together

$827,000

$1,030,000

Couples living apart due to ill health

$973,000

$1,176,000

Couples with only one partner eligible

$827,000

$1,030,000

For transitional rate pensions, reductions apply when your assessable assets exceed these thresholds:

Category

Home owners

Non-home owners

Singles

$503,250

$706,250

Couples living together

$783,000

$986,000

Couples living apart due to ill health

$879,500

$1,082,500

Couples with only one partner eligible

$783,000

$986,000

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^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

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