For many first-home buyers,Using Super to Buy Investment Properties in Melbourne Here is an attractive option because it allows them to save for a deposit faster. This is because the first $25,000 of contributions each year into a super fund are taxed at 15%, rather than the normal marginal rate, and both compulsory and voluntary employer contributions count toward this limit.
What are the disadvantages of super?
However, there are many factors to consider when using your SMSF to purchase an investment property, and it’s important to understand the pros and cons of this strategy before pursuing it. If you’re thinking about buying investment property through your SMSF, it’s a good idea to consult with an independent tax accountant or financial adviser to make sure it’s the right move for you.
Using SMSF funds to buy property can be expensive. The cost of setting up an SMSF is around $1,000, and you’ll need to pay legal fees, insurance, a bank fee and building and pest inspections, which can add up. This is on top of the property’s purchase price and ongoing maintenance costs.
Also, SMSFs have limited borrowing capacity outside of super, which can restrict the amount you can invest in property. There’s also the risk of your SMSF not meeting the sole purpose test, which could see you lose your tax concessions and future super growth. It’s also worth remembering that your super is locked up until you retire or turn 65, so the money can’t be accessed until then.