Are You Thinking of Using Super to Buy Investment Property?

By Property Investing Australia Networking Group

In Australia, a common way to accrue retirement funds is through an SMSF (Self-Managed Superannuation Fund). The program is supported by the Australian government. That being said, minimum provisions are required for employees, and employers are obliged to pay a percentage into the fund, in addition to an employee’s salary and wages.

Some interesting facts to know about SMSFs is that the members themselves actually manage the fund; however, the fund and its members must adhere to certain tax rules. Currently, there are roughly 500 superannuation funds operating in Australia. Approximately 362 of them have assets totaling greater than $50 million, and by the end of March 2015, SMSF assets totaled $2.05 trillion.

As of July 2005, changes to the existing laws were made and that meant that many employees had the choice as to which fund they wanted to put their retirement funds into. With that in mind, an increasingly popular way for members to use their fund is by using super to buy property in hopes that it will grow faster.

If you are thinking about buying property through SMSF, you’ve most likely realized that there are a few things to consider. Even though this is an option, it is highly regulated by tax rules and other laws. And, the rules seem to change and are updated regularly. The Australian government is doing this to help you protect your fund and not get hooked into a “bad” investment deal that could leave you penniless.

When it comes down it all, what you really need is a sound investment strategy when buying property with your super. As with any type of investment, there are risks involved, but the stakes could be much higher in the case of using your fund. In short, it’s important that you make yourself aware of the SMSF property investing rules before you get started in this type of venture.

Is it really that serious? Yes. Well, it could be. The worst thing about getting into something without being aware of the laws and risks is finding out after the fact and having no recourse or ways to recover your fund and/or funds. Of course, a lot of the laws in place do help prevent that, but since an SMSF is considered to be more of a “Do-it-Yourself” type of retirement fund, you still have the power to make certain choices when it comes to investing with it.

Whatever you decide to do, make sure you consult with the regulatory bodies to not only make sure you’re on the right track, but to also make sure that the person or property investing organization you decide to work with is legitimate and licensed as per the regulations set forth. Here is an SMSF property investment example that walks you through the entire process.