Prop­erty an un­tapped op­por­tu­nity for self-funded re­tirees

NT News - Real Estate - - Real Estate -

RE­TIREES buy­ing prop­erty through a Self Man­aged Su­per Fund (SMSF) could po­ten­tially save thou­sands in tax if they in­vested wisely, a lead­ing au­thor­ity on self-man­aged funds said.

Opez chief ex­ec­u­tive Cindy McDon­ald said mar­ket con­di­tions had fu­elled a surge in in­quiries from peo­ple want­ing to bet­ter un­der­stand how they could max­imise their abil­ity to buy prop­erty via their self-man­aged fund.

"Since changes in su­per­an­nu­a­tion were in­tro­duced in Septem­ber 2007, a SMSF can now bor­row to buy as­sets, in­clud­ing prop­erty,'' Ms McDon­ald said.

"It can be an ef­fec­tive way of in­vest­ing for re­tirees, but it's im­por­tant they un­der­stand how prop­erty can be used and when they can ef­fec­tively ac­cess the cap­i­tal that's tied up.''

There were still many mis­con­cep­tions about what SMSF could in­vest in.

"We of­ten have clients tell us their fi­nan­cial ad­vis­ers have ei­ther told them they can't buy prop­erty, or if they can, it must be in­come/pro­duc­ing, or a par­tic­u­lar type of prop­erty and this is mainly be­cause not enough ad­vis­ers un­der­stand the leg­is­la­tion,'' she said.

In­vest­ing in prop­erty with SMSF was at­trac­tive be­cause of the num­ber of tax con­ces­sions. "In­come de­rived on a prop­erty pays tax at 15 per cent, or 0 per cent where the fund is in pen­sion mode, which means more af­ter-tax dol­lars are gen­er­ated,'' she said.

"And when the prop­erty is sold, the max­i­mum tax on any cap­i­tal gain is 15 per cent, or 10 per cent if the as­set was held longer than 12 months be­fore the sale, and 0 per cent if it's sold while the fund is in pen­sion mode.

"Add to that, the tax-free pen­sion that can be paid out to mem­bers who are aged 60-plus, and its a pretty hard com­bi­na­tion to beat,'' she said.

The tax breaks are con­sid­er­able, and are an in­cen­tive for peo­ple to use SMSF to buy prop­erty.

Ms McDon­ald said un­der­stand­ing some gov­ern­ing rules, such as what the SIS Act and reg­u­la­tions re­quired from a SMSF, was the key to build­ing a suc­cess­ful fund. "The Sole Pur­pose Test un­der­pins the whole su­per sys­tem. "The pur­pose of your SMSF must be to pro­vide you or your ben­e­fi­cia­ries with re­tire­ment ben­e­fits and this should be taken into ac­count when de­cid­ing on your in­vest­ments.''

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