Safe as houses: - The benefits of buying an investment property through your Self-Managed Super Fund (SMSF)

Following the GFC, it is no surprise that Australians are increasingly taking control of their retirement years by establishing their own self-managed superannuation fund (SMSF). Over the last decade, the landscape of Australian superannuation has significantly changed, for example back in 2003, only 10% of all super money was held in SMSFs, however now 10 years on, SMSFs hold the greatest amount of money ($1.58 trillion!) and we have more than 500,000 self-managed super funds established across the country.

So, we know that many of us got stung over the GFC, but what are the other factors that are contributing to this shift? Self-managed superfunds are becoming a popular alternative for people who want to broaden their investment portfolios over a traditional managed fund, enabling flexibility to determine a strategy that suits your needs and provides control over yourassets (not to mention, a reduction in management fees).

Furthermore, given the volatile market conditions, the saying ‘safe as houses’ could never be more true. Yes, the property market has also felt the pinch over the last few years, but for those who are looking for a growth strategy that will provide a stable return over a period of time, buying an investment property through your SMSF, whilst the market is low, could look to provide fruitful returns in the future.

Interested in learning more? Below are some of the financial benefits of buying an investment property through our self-managed super fund:

  1. Rental Income Tax
    For SMSFs the maximum rate of tax you will pay on your rental return is 15%, and if you are in your retirement years (the pension phase), this rate will drop to 0%. This compares to a maximum tax rate of 46.5% for those of you who have an investment property in your personal name and are currently a high income earner. This benefit means that a larger proportion of the rental income ends up in your back pocket, rather than with the tax man, which enables you to repay your loan and build your wealth in a shorter timeframe.
  2. Capital Gains Tax
    Similar to the rental income tax, there are also benefits for capital gains. For investment properties purchased through a SMSF, the maximum gains payable is 10%,provided that the property is held for more than 12 months. Once again, if the property is sold in the pension phase, the capital gains rate will drop to 0%.
  3. A reduction in fees and commissions
    As we all know, professional funds charge us a range of fees and charges from annual interest rates, service fees to commissions, and when they’re not monitored carefully, these can all mount up. By managing your own self-managed super fund, one can exercise control over the fees that are paid. By carefully choosing your investments and transactions these ongoing fees can significantly be reduced.
  4. Investment flexibility and diversification
    It goes without saying; SMSFs offer greater flexibility and allow you to decide how you manage your fund and what assets you decide to invest in. From a property perspective, a SMSF can acquire basically all types of property, including residential, commercial, office space, factories, vacant land and land lots. The trustee has the option in setting the investment strategy and asset mix. Since it is self-supporting, you can monitor and review your investment strategy anytime you want. Therefore,ultimately you are in control of your own retirement.
  5. Create a cashflow investment fund
    When you hit retirement age, any income from your investments (i.e. rental income) can be withdrawn, tax-free. We know from our research at Dovetail, that following 30 years of work on an medium salary, the average Australian’s superannuation funds will equate to $180,000, however to live comfortably a couple requires $56,339 per year (in today’s market). Given our aging population, it is critical that we structure sustainable superannuation strategies, and investing in cashflow property through your SMSF, is certainly one smart option.

If you’re looking to find out more or if you would like to view some off-the-plan opportunities to purchase an investment property through your SMSF, contact us at or call Cam Bloomfield on 1800 220 148.