While there may be too many variables in statistics, national discussions on the role of self-managed super funds (SMSF) in inflating Australia’s property bubble have been, in recent years, on the rise. In retrospect, similar arguments in socio-economic circles have begged to question how people can boost their retirement savings and still buy property using SMSFs – hitting two birds with the same stone.
Well, the good news is, investing your superannuation in property is a surefire strategy to grow your wealth, which makes for a great retirement investment plan. Australians are now largely building comfortable retirement plans using “super” property investments for one of the following three reasons:
To save them on tax expenses
With SMSFs, you can claim tax deductions on borrowing expenses. Additionally, if you pay your rental income to your super, you will only need to pay 15% of rental income tax. Better yet, the rental income and capital gain from selling SMSF property are usually tax-free once you attain the preservation age.
To hasten their pace in building bigger investment portfolios
If you have an SMSF, you can borrow limited recourse loans to invest in commercial or residential property. The interest rates attached to LRBA loans are quite low, and the mortgage lenders can fund up to 80% of the total mortgage costs.
So, if you can rake in returns higher than the borrowing costs, why not take advantage of building a bigger investment portfolio.
To diversify their fund assets
SMSFs offer a wider range of asset types for property investment than those traditional super funds provide. Therefore, spreading your savings across these different investment options, you will reduce the risk of loss while you invest in capital assets.
You now agree investing your super funds in property can give you high ROI. Do not forget to observe these important rules: conform to your written super investment strategy, only use non-recourse loans when purchasing property, stick to the purpose of investing for your retirement days, and keep off related party transactions.