Does anyone know if I would need help from a private wealth advisor if I am looking to buy property in a SMSF?
I want to minimise the capital gains tax from my property purchases. I'm trying to roll as much money as possible into my SMSF as I have recently sold some other investments and now believe property is the way forward.
Has anyone had much success with buying property inside a SMSF and do you have any nasty stories to share?
and now believe property is the way forward
What if you're wrong. You'll have a lot of eggs (value wise) in the one basket.
minimise the capital gains tax from my property purchases
If you're buying now, you don't have to worry about capital gains tax - unlikely to get capital gains when you buy when interest rates are at all time low.
Check with advisor what happens to income losses - are they carried forward, etc.
For tax questions, I believe you should check with a tax agent.
I was considering buying property inside a SMSF before, but the major banks exited the market and only a few lenders are available (see https://www.esuperfund.com.au/property/rates-and-fees/reside…). The interest rates are also very high compare to non-SMSF rates.
You may also want to check the rental return of your investment property, in Sydney the rent dropped 10% to 25% this year in certain suburbs.
Highly advise you speak to an accountant who is also a licensed advisor.
Some things to note:
are you borrowing money? If so then you can only buy a ‘single acquirable asset’. In other words, one thing. This means if you borrow to buy a block of land, you cannot build on that block until your debt has been fully paid off.
is it residential or commercial? If it’s resi you have to lease it out to a third party. No relatives or associates.
If it’s commercial you can lease it off yourself so long as it’s arms length.
Oh I forgot my nasty story:
There was a story of someone who borrowed to purchase an apartment. When they got audited it turns out they breached the single asset rule.
How? They were perplexed. The apartment came with a car park. This was considered a seperate asset. Costly mistake…
What was the consequence of their costly mistake?
Off the top of my head they had to sell the asset. But was a while ago
wow.
Why is buying property so much more difficult in an SMSF vs personally buy? Weird :(
Because with great benefits comes great responsibility
YES - an advisor, and an accountant to manage the ongoing accounting. Unless you know the rules very well of course.
Generally this strategy would make more sense for someone younger because they’ve got plenty of time before retiring. This also makes sense if you have a big SMSF balance and having a big chunk tied up in one asset will not be an issue if the property market dropped / your apartment had strata issues & can’t be sold, etc. Basically, you want to provide for the possibility of being wrong.
Yes