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Buying property as part of your SMSF: it's still debt

April 2012

A recent article on the Australian Financial Review website highlighted the potential benefits for people buying residential property for their SMSF. Where once it was only the wealthy who could afford to add property to their SMSF, due primarily to the availability ofcash resources ,to do so, now SMSFs can acquire property with a mortgage through limited recourse borrowing.

Ausralians have over $14 billion invested in residential properties as part of their SMSF holdings and there are some real benefits that have arrived with the ability to borrow money for property in your SMSF, such as using pre-tax dollars, no CGT when the asset sells in pension phase and some generous depreciation rules.

However despite the benefits of now being able to borrow the funds for SMSF properties, the key is remembering that it is still a debt.

As Bates Cosgrave Partner, Glenn Cosgrave said in the article, "Buying property through an SMSF is a good move when there's a good strategy."

"When you use self-managed super to buy a rental property with a mortgage, it's still a debt," he says. "We use cash-flow modelling with clients so they can account for every cent until the asset is sold. You can't rely on capital appreciation and you can't rely on rental income. You have to have a buffer and you have to have a plan for when your assumptions are not met."

Read the full article here.

 

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Last updated April 2012. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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