SMSF Property or Shares

Hi Sam, 

holding property in your SMSF is designed to allow an investor diversify their assets for retirement. Putting all of your eggs in one basket defeats this purpose. However, many people still choose to do it. You will need to ensure you have a very thorough understanding of property and your investment strategy.

Also, it will depend on what you plan to contribute to the SMSF from your salary as you may be planning to increase it a bit? 

Look for property that is higher yielding in your SMSF as interest rates are higher using a LRBA. 

With flipping, you can do it. You are restricted when it comes to borrowing for renovations etc, or even renovating a borrowed asset in some cases. You need to be careful not to change the 'use' of the property. Also, you must purchase a 'single acquirable asset' to meet regulations. You are also limited when it comes redrawing on equity for capital growth, this cant happen. 

Hope this helps

Have to agree with what the others have said. Borrowing in Super is my favourite past time.

I started my own SMSF in 1995 with $60K and now it has over $4.3M in a variety of asset classes including a number of propertied which unfortunately I had to pay cash for as they were purchased pre Sept 2007.

Flipping is certainly allowable inside a SMSF however the set up costs may in road into your profit and you would not enjoy the 10% CGT concessionary rate if the asset is held for less than 1 Year.

If you intended to consider that you may want to look at a Related Party Loan where you could lend money to the Super Fund at a cheaper rate.

Maybe borrow it personally at say 5.5% and lend it out at 4.5% claiming the Tax loss in your own name.

This is only one strategy we work thru with clients looking at starting their SMSF portfolios.

In saying this remember the goal with investing in Superannuation is to provide retirement benefits for the members and therefore your choice of property should cater for this.

We work with forum investors all day long setting up SMSF's structures for them and then buying a property tailored to their goals.

Don't try and make it a quick fix but use gearing to your advantedge to build up the pot of gold which you can enjoy in later life.

Cheers

Yours in Finance

Hi Terry

Never like to disagree with you as you know but might have to to so on this one.

http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID2010162/00001

We have done a number of deals for clients this way thru a couple of leading Accountants in Brisbane and never had it raised. 

Several of the clients have been fully audited without issue.

Easier where you work in an offset account to the mix.

Cheers

Yours in Finance

Hi Richard,

I agree a related party can lend to a SMSF at lower rates than commercial rates. The ATO ID you refer says this, but this is only for the SIS Act. It doesn’t cover someone borrowing and onlending to a SMSF at x and onlending at y – where y is less than x. This doesn’t make commercial sense and the individual would only be able to claim interest to the extent of the income they receive. ie they couldn’t claim a loss.