Using a Self Managed Super Fund (SMSF) to Invest in Property
MJ Anthony
Published by MJ Anthony at Smashwords
Copyright 2011
Smashwords Edition, License Notes
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This is a report about SMSFs: how they work and the minefield of problems that can occur when they are used to borrow to purchase property using Warrants.
This report is for Australian residents but the concepts may be able to be used in other countries.
I am an Australian residential property investor and live in the Hills district of Sydney. I have been investing in residential property in Australia for over 6 years, and have accumulated a number of different types of residential properties, from apartments to brick houses to fibro homes, with a portfolio value of over $2 million.
I am passionate about property and believe anyone is able to build a self-sustaining property portfolio to enable them to achieve their lifelong dreams.
The information, statements and opinions expressed in this publication are only intended as a guide to some of the important considerations to be taken into account relating to finance and property investment. Although we believe that the statements are correct, they should not be taken to represent accounting, taxation, legal or investment advice and you must obtain your own independent advice from an appropriately qualified professional. Neither the publisher nor any people or organisations involved in the preparation of this material give any guarantees about its content or accept any liability for any loss, damage or other consequences that may arise as a result of any person acting on or using the information and opinions contained in this publication.
What is a Self Managed Super Fund (SMSF)?
A Self Managed Super Fund (SMSF) is a trust that is managed by a trustee. The key difference between a regular Super Fund (such as Sun Super, QSuper, Hesta, etc) and a Self Managed Super Fund is you. You control the structure - you control how the fund invests its money.
Who would want to use a SMSF?
If you want to have absolute control over investing your superannuation contributions, then a SMSF is one way to achieve this goal. With a regular super fund, you sometimes can choose your investment strategy - e.g., cash, Australian shares, International shares, or a mix, but you ultimately don't decide how the investment is carried out. If you have a SMSF, YOU choose how the money is invested.
If you're lazy or really want to delegate it to someone else, a SMSF is not for you.
What are the advantages of using a SMSF?
There are a number of advantages:
Absolute control over the investing strategy.
Income in the SMSF is taxed at a maximum rate of 15%.
In retirement, you can sell assets in the SMSF and pay $0 in Capital Gains Tax.
SMSF’s provide rock solid asset protection.
What are the disadvantages of using a SMSF?
On the flip side, there are a few disadvantages too:
Responsibility: you alone are responsible for obeying the law, investing the funds and managing the strategy.
Fees: it costs money to set up and money to maintain and run a SMSF.
Law may change: The Australian Taxation Office (ATO) has the power to change the way SMSFs operate within the law. In essence, what may be permitted in one month may be outlawed in the future. You have to stay on top of legislation changes.
Complex: investing with SMSFs are quite complex and you need a savvy property accountant to ensure everything is handled smoothly.
Rules of a SMSF
Note: these aren't ALL the rules - just some of the more pertinent ones.