About the Author

Jess is an experienced operations professional. She has worked for businesses across finance, property investment and law.

Having collaborated with business owners, clients and front line employees, her expertise and analytical techniques give her a unique perspective on every topic.

Jess has a passion for building processes, managing projects and helping Australian consumers understand the industries she’s been involved in.

Who is a Financial Planner 

Financial Planners advise and assist their clients using a structed process to guide them towards financial decisions. Using their knowledge in budgeting, finances, superannuation, taxes or investments, such as property investment combined with analytical tools and data, they give recommendations and guidance to help clients make informed financial decisions and plan for their long-term future.  

While Financial Planners generally specialize in one area, such as property investment or self-managed super funds, many offer a holistic approach that considers the clients overall wellbeing. The type of financial planner that is right for you will depend on your situation and future financial goals.  

They are considered fiduciaries, meaning they are legally bound to act in the client’s best interests and cannot personally benefit from the management of the client’s assets and or self-managed super funds. Like all financial advisors, Financial Planners must have sufficient education, training and experience.  

 

Younger Australians are more likely to default on payments. (Source: Illion - Credit Card Nation Report, 2018)

How do you buy property from a Self-Managed Super Fund  

Every self-managed super fund should have an investment strategy. It is a requirement from the ATO to have one in place if you wish to purchase investment properties through your superannuation. 

Instead of investing funds into the superannuation providers bank accounts, many Australians are looking for investment strategies with more control over their finances. Self-managed super funds are complex, so it is important to use a mortgage broker, accountant or financial planner who understands self-managed super funds and purchasing investment properties through your superannuation.  

An investment strategy will articulate the investment decisions you need to make to meet the financial objectives. These decisions are generally what assets to buy and sell to best meet those financial objectives.  

A self-managed super fund is the only form of superannuation structure that you can directly own a property and have complete control of your investment strategies, investments and the overall diversification in your financial portfolio. While there are many pros to buying an investment property through your superannuation, there are also risks that should be considered before making your decision. We recommend consulting your Financial Planner in setting up your self-managed super fund.  

Using a self-managed super fund loan in most cases, is the only practical way to acquire property due to the large purchase price and the amount held in the self-managed super account.  

In conclusion, an investment property can be a good fit to some self-managed super fund investors who are investing. However, the risks from borrowing need to be well considered. A good starting place is to consult with your Financial Planner about your superannuation and purchasing investment properties through a self-managed super fund. 

Other things to consider when property through self-managed super 

Using self-managed super funds (SMSF) to buy property in Australia is nothing new, the difference we see today is that you now have the ability to utilise your SMSF to borrow money to do so. Generally speaking, properties are one of the strongest forms of investments, they fluctuate less than the stock market and generally boast higher returns. Buying investment properties outright is a much less complex operation however, having the option to obtain a mortgage through super makes a property-based SMSF a possibility for many more Australians. 

SMSF owners don’t need to pay capital gains tax when they retire. Personal tax rates in Australia can go up to 46%, within super, the most you will pay is 15% on rental income following expenses and any capital gains on the sale of the property. Along with this, members who take part in salary sacrificing may be eligible for tax deductions on loan repayments. Further tax deductions may be claimable on things like investment-related insurance, property depreciation, purchase related expenses, property management and fees related to the sale of the property. 

Although properties are hailed as a great investment option, specialists generally do not recommend them to make up 100% of your investment portfolio. To reduce risk, financial planners will usually diversify your assets between different investment vehicles. Property acts as an additional method of diversification. 

SMSF can only be used to purchase investments or commercial properties, this means you and family members cannot live in the property prior to retirement and it must be leased out to external parties. Once you do retire however, the assets of your superannuation are transferred directly to you, at which point you can either live in your properties or sell them to purchase alternative properties for your retirement. 

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