Should I invest in property with my SMSF?

Date: 23/11/2012

Should I invest in property with my SMSF?

Every type of investment involves a certain degree of risk, but to invest in property using your self-managed superannuation funds (SMSFs) can be especially tricky.

The process is quite complex and therefore poses a greater margin of error.

The Australian Tax Office recently issued a warning pertaining to these types of investments to ensure they are carried out according to lawful requirements.

“We have observed that some arrangements are deliberately entered into to get around the law, which can result in the fund’s trustees being disqualified, facing civil penalties or even facing criminal charges,” ATO acting commissioner Bruce Quigley said in a statement issued November 20.

He added that marketers of such engagements could be referred to the Australian Security and Investment Commission (ASIC).

“The fine details are important and trustees need to be sure that property is the right investment for their SMSF and that the arrangement is legal.”

Many Australians are coming around to the idea that using their SMSF to invest in property may be a better option in terms of securing a comfortable retirement.

Rules are strict when it comes to dictating the type of real estate development you are able to carry out using your SMSF.

The amount of money you have in your SMSF and the plan you have for your property will all impact on your ability to embark on this type of strategy.

Here is where the need for reliable advice becomes evident. SMSF type of investments can be effectively executed and result in favourable outcomes – if you know what you are doing.

Mr Quigley urges SMSF trustees to obtain reliable and independent advice before embarking on such a decision.

“The responsibility for ensuring their SMSF complies with the law rests with them.”

By Steve McKnight

Steve McKnight, the founder of PropertyInvesting.com, is a respected property investing authority as well as Australia's #1 best-selling business author.

Comments

Scott No Mates December 9, 2012 at 7:02 pm
You may also need to consider whether or not you will need to diversify your investments within your fund ie equities, cash, bonds, precious metals, other investments and determine the weighting of each.
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SMSF101 December 20, 2012 at 5:49 pm
It is still best to seek experts advice with regards to using or borrowing from smsf for property investing. One good reason is that they know the rules and regulations for borrowing arrangements and how to establish it correctly within the rules. SMSF experts can help set-ups and asking for updates would be a great help.
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