Invest in Property Jointly with Your Super Fund

Not many people realise they are able to make an investment jointly with their super fund and by doing so, significantly advance their real estate accumulation in a very, very tax-effective manner.

For this strategy to work, it is essential you have advice from an adviser with experience in self-managed superannuation. The laws governing self-managed super are complex and mistakes can easily lead to penalty rates of tax that can wipe out your fund. DBA Accountants suggest you talk to one of their Team Members.

The Strategy

  • You and your superannuation fund purchase a rental property as tenants in common.
  • The super fund puts in cash.
  • You borrow your share of the purchase price (say, against the equity in your home).
  • Income and expenses of the property are shared between you and your super fund in proportion to your ownership.

Result: Your super fund has no debt (gearing) but you are negatively geared, with attendant tax advantages.

Taxation Consequences

  • The super fund pays tax at 15c in the $ on its earnings if it is still in “accumulation” phase or NIL if it is in “pension” phase.
  • You save up to 45% + levies on your negative gearing loss.
  • Eventually the property is sold
  • On its share of the capital gain, the super fund pays 10c in the $
  • Capital Gains Tax if it is still in “accumulation” phase or NIL if it is in “pension” phase.
  • You pay up to 22.5c + levies in the $ – less if you are able to time the sale to fall into a low income year.

Estate Planning Consequences

Acquisition of long term assets and the creation of your own self-managed super fund are significant events in your lifetime financial plan.

In discussion with DBA Accountants, you should:

  • Review your plan
  • Review your Will to accommodate the new assets and any changes in your family situation
  • Review the adequacy of your protective insurances
  • Review your Enduring Power of Attorney

Simple When Complete

This strategy is a simple one, once it is complete. But to have it complete and completed correctly with you able to sleep easy at night, requires expert input. At DBA Accountants, we practice the art of taking complex situations and making them simple and safe for our clients.