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Phil and Jenny are in their 40’s, both working and have accumulated some $210,000 between them in their respective employer super funds.
After talking to Planning Professionals they decide to purchase an investment property using their superannuation at work!
A Self Managed Super Fund ( SMSF ) is set up and the $210,000 transferred in . In future their employer’s super contributions and their own will be remitted to their SMSF.
Phil and Jenny now purchase a property for $400,000 .The SMSF contributes $150,000 cash and borrows $250,000.plus costs. The ongoing interest and other property costs are covered by the rent and super contributions, but Phil and Jenny decide to salary sacrifice to meet any shortfall.
Upon reaching age 60, Phil and Jenny retire. As they now require a regular income and access to capital, they sell the property. They pay no capital gains tax! Furthermore, their regular income drawings from super are completely tax free as are the future investment earnings of the super fund.
Can you buy property with less cash in your super? Yes you can!
Superannuation funds can now borrow to purchase real estate. The Superannuation Industry Supervision Act (SIS ACT) was amended in September 2007 to allow super funds to borrow against assets such as property. The gearing of shares has of course been available for some time now.
Couple this with the Choice Of Supernnuation legislation introduced on 1st July 2006, allows many more Australians than ever before to take their super at work, set up a SMSF and choose their own investment strategy, including borrowing within the SMSF to purchase an investment property of their choice.
Here are just a few of the potential benefits;