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How to Buy Property within you Super?

Buying Investment using Super Fund

Many people don’t realise the potential to use their own superannuation to buy a property using their own Self-Managed Super Fund (SMFS). By using this avenue for significant wealth creation, clients can borrow using their super fund balance as leverage (current LVR rates around 60-70%). That is, if you have $200,000 in superannuation, you can use those funds to leverage approximately a $600,000 purchase. Given that our average purchase is a lot less than this, clients can purchase investment properties using a super fund with a much lower balance than the example provided.

When purchased, bearing in mind it must be an “arms-length” transaction (not purchased from yourself or any related parties), your annual superannuation contributions can pick up any shortfall in costs related to the property. Any profits the property provides are put back in to the super fund at a maximum of 15%.

Once you fill the appropriate retirement criteria, any rent received from the property is tax free, and in the event of a sale, any capital gain made is tax free.

The ability to borrow using your self-managed super fund has only been around of a number of years, people are starting to take advantage of this as they find that property can provide a more secure investment than trading the volatile share market. It is important that you use an experienced self-managed super fund manager as well as a mortgage broker who knows what they are doing. Our team can provide this for you to streamline the whole process. In fact, on some of the purchasers through Portfolio Property Investments, we will even pay the fund manager the appropriate set up costs for you to have a Self-Managed super fund that not only earns you rent but gets a high return which can be up to three times the value of your super contributions current earnings.

Q.  But my super is with a fund manager, can I use it?
Simply, Yes. You need to set the appropriate structure up with a qualified and experienced Self-Managed Super Fund accountant which we can arrange.

Q.  I already earn money through my superannuation account, why change now?
Let’s say you have $150,000 in superannuation. Over a ten year average, super funds have earned around 6%. That’s a $9,000 return per annum on your super fund. Now let’s say you used that amount to fund a property acquisition. We will use an example of buying a 3 bedroom duplex unit in Emerald QLD at $370,000. You have used $111,000 for the deposit of 30% plus $15,000 of purchase costs including stamp duty etc. The unit rents for $500 per week, giving you a net return just over 7% ($26,000 per year). Interest plus rates and fees will take most of that, however, you have now have an asset which is costing you nothing to hold and is growing on the Australian average of 8-10%. Let’s be conservative and say it only grows 8% pa, instead of a return of 6% on $150,000, you are now earning approximately 8-10% on $370,000. That’s a difference of over $20,000 per year in net growth for your superfund.

How Much Do You Need In Super To Live the Lifestyle You Live Today In Retirement?

Why invest in your SMSF you are asking?

1.   AMP in their market analysis found that 70% of people now aged 50 – 69 will earn less than $320 per week at retirement!

a.  Can you and your dependents at the time survive and enjoy retirement on $320 per week?

b. We live to work, we work to live … but at retirement can we afford to live when we can’t or don’t want to work?

2.   Using the 9% superannuation grant levy, you may not know, will only provide a quarter of what you need in retirement.

a.  We just don’t realise how much money we will need to come out on a weekly basis. Not enjoy life, just to come out!

3.   BIS Schrapnel show that the required income for a retired couple, who are debt free, would need to be in the order of $43,000 today

a.  Inflation at even 3% will turn today’s value of $43,000 into over $85,000 in just 20 years time

b. Will you have accumulated sufficient capital so that you can retire in the lifestyle you are accustomed to and wish to maintain?

4.   We also know that retirement capital after retirement will probably run out far sooner than needed!

a.  It will not run the length of retirement – and we are living longer these days.

5.   Having shared all the ‘cup is half full’ doomsday information with you, we ask you to realise the fact that :

a.  We need to put more away towards retirement than we currently do

b. We need to start far sooner investing in our Super

c.  And most importantly … we need an element of control and choice of how our money is invested

i. PROPETY provides you with an overall solution to accelerate your savings

ii. To become tax efficient now and at retirement

1.  Tax Efficiency at retirement will guarantee you more money in your pocket !!

iii. Forces you to save towards your retirement

iv. You can run your SMSF into perpetuity for your beneficiaries

v.  Minimise capital gains taxes, maximise the outcome

6.   Leveraging with a financial institutions funds, up to around 70% (of borrowings), in the purchase of your Investment Property

a.  Which, after holding for 10 years in your SMSF, for which there is not one cent of Capital Gains payable if you sell when you retire.


Summarised : The benefits of having a SMSF (or DIY Super Fund) include :

a.  Ability to reduce income tax on investment income and capital gains

b. Increasing your flexibility of investment choice, asset selection and giving you control

c.  You managing the risk profile of your investments

d. Managing the income streams at retirement for you and other members of the SMSF

e. You can transfer personal assets (shares, gold, art, property etc) into your SMSF

f.   Pooling assets of up to 4 members (allowed) into the SMSF will save on costs

g.  The more tax efficient you are able to retire in, the more money in your pocket for retirement and planned choice of Lifestyle

After all “It is your money!”


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