For many years our clients have asked to have the safety and security of residential property within their superannuation funds.

Until recently, the only way a super fund could fund the purchase of a residential investment property was with the cash balance of the fund.

Recent legislation changes now allow super funds to borrow to purchase assets.

What is the largest asset in most people’s lives?

It’s usually their SUPERANNUATION.  Superannuation is a long term savings plan designed specifically to provide income in retirement.  Up until now the option of superannuation investment in residential property was limited.

Changes to Legislation

Recent CHANGES TO LEGISLATION have altered all this. In 2007 there were Amendments to the SIS Act. These amendments provide an exception to the superannuation borrowing restriction. This effectively allows a Super fund to borrow for the purposes of property purchase – subject to strict conditions. This means we can implement gearing via a Debt Installment Trust structure.

A super fund trustee may borrow to acquire a beneficial interest in an asset that is held on trust for it. Due to the strict legislative requirements around this exception, it’s very important to get the structure right.

Opportunities

This new legislation has opened up investment opportunities.  Installment Warrant legislation effectively allows limited borrowing to purchase a variety of assets:

Why Super?

Super is THE MOST tax effective savings vehicle. It keeps our savings and assets safe from creditors. We already know that it provides a long term savings for retirement and tax free income after age 60. You pay only 15% tax on contributions and investment returns – as opposed to your marginal tax rate of up to 46.5% (including the Medicare levy) less tax means more of your own money is available to invest.

Capital Gains Tax is typically lower inside super, and if you transition your super to pension phase, no CGT may be payable. Capital gains tax within super is a maximum of 15% and potentially 0%. Current legislation limits contributions, but by borrowing  the super fund can increase the value of assets it holds and all future growth will be within the super environment.

Where to from here?

Superannuation remains the best place to invest for the long term. The opportunity exists now to put residential investment property into your super fund. It’s not for everyone – and you should seek specialist advice and assistance to determine if this is the right investment for you. Summit Financial Strategies is there to assist you at every step.

Contact Summit Financial Strategies Pty Ltd and arrange your initial consultation to assess your suitability for this strategy.