Particularly
with residential properties where we’re borrowing to invest
in self-managed superannuation there are very stringent
restrictions in place, some of the usual investment restrictions applied that
we would talk about when we talk about investment strategy, things like operating
an arm’s length, using all commercial terms and not having in house assets and
things like that, but I guess to explain that more clearly what we’re looking
for with residential property is not purchasing that property from a member or
a related party of a member, so any one associated with that member is removed
from the picture, we can’t acquire a property from him nor can we lease the
property back to him even for a week or year, so we could for example buy a
holiday house with their superannuation money and expect that a family member
or relative can stay could stay in that property at any point in time, so with
residential property we’re quietly limited in terms of the use, we can buy at
arm’s length and we can lease it out at commercial rates to unknown parties or
commercial basis in that time.
When it
comes to commercial property investment or
business property it’s not as restricted, so we still have to operate on arms
length terms, make sure all the rates and rent and all of those kinds of things
are at commercial rates and we have proper leases in place and things like that
but we can acquire that kind of property from a member of the fund or a
relative of the member, so we could move for example a business property like a
factory into a superannuation fund using borrowings to acquire that business
property, that factory, I mean the business and that factory would pay rent to
the self managed superannuation fund as the owner of the fund on arms length
terms, so we can have the later parties in that instance but you can’t do that
with residential property.
The
other restriction is that we can’t develop property when its subject to
borrowings within superannuation, so if we are looking to acquire a unit or
something like that and do it up putting a new kitchen or bathroom, we can’t do
that within the superannuation environment, it’s something that we need to look
at outside of superannuation, so within the super environment you can acquire a
property, you can certainly do repairs and maintenance but we must be very
careful not to bridge the rules and step out of the line and turn that repair
or maintenance into a big improvement that really changes the nature of that
property, so development is pretty much out until you’ve paid off a property,
once a property is paid off you can do what you like, so you could develop that
and make substantial gains in that way. In addition, because of that limitation
on developing property you couldn’t for example buy a piece of land
and then later on build a house on it or a factory or something like that,
again that’s property development and it’s just not permitted within the
superannuation environment when we are borrowing to invest.
There is no
substitute for getting professional advice and second opinions when it comes to
big financial decisions. As with all investment types and prior to making
any investment decisions, your should consult a professional and licensed
financial planner for advice on whether a SMSF and direct property investment
is suited to your circumstances.
Future Assist Financial
Services Group is an established, experienced and licensed financial planning
firm assisting many Australians with their financial and retirement planning.
Talk to Future
Assist today to see whether SMSF and direct property investment is
suitable for you.
We can arrange your
FREE self-managed superannuation setup and investment planning consultation:
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Via Skype (anywhere in Australia)
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In our Offices (Brisbane, Sydney, Melbourne,
Southport)
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We can come out to see you in the convenience of your home
or office.
The
team at Future Assist specialise in self-managed super,
assisting you to regain control and make your super work well for you. Our
experts are adept with the latest industry movements and trends, providing you
with advice on how to manage your funds effectively.
IMPORTANT:
The information above is general in nature and has not taken into consideration
your personal goals, financial situation or circumstances. We recommend that
prior to making any decision regarding your financial circumstances,
investments, superannuation, SMSF or direct property investment, you should
consult your licensed financial planner or adviser.
Future Assist Financial Services Group Pty Ltd ABN 24 151
337 843
Australian Financial Services License No. 413674
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