Borrowing in Super
Under certain circumstances it is now possible to borrow money within your superannuation fund for investments. This includes real estate.
If you are considering borrowing money for real estate in superannuation, it is paramount you consider all the issues. These include:
Pros
- Purchases of real estate (land) that do not produce income are effectively tax deductible
- Principal loan repayments are effectively tax deductible
- Tax effective when property becomes positively geared
- Minimal or no tax payable if capital gains are realised
- Asset protection in case of litigation or bankruptcy
- Total control of your superannuation fund
- Possible refunds of superannuation contribution tax to your family on your death.
Cons
- Slightly higher borrowing costs
- Higher loan establishment fees
- Set up costs of the structure (Self Managed Superannuation Fund)
- Higher running costs of the structure
- Property cannot be used for private use
- Unable to utilise non-tax deductible debt reduction strategies
- A deposit of approximately 30% is required.
Other Considerations
- Gearing levels of the property
- Land tax
- Non-cash flow rental tax deductions
- Current superannuation contribution amounts
- Equity in the investment property cannot be used to fund an additional property
- Your current and future marginal tax rates
- Superannuation legislation risk
- First Home Owners Grant
- A Self Managed Superannuation Fund can have up to 4 members
- Funds can be sourced from personal funds or equity.
We can arrange very competitive legal fees.
As you can see there are many factors that need consideration. If you would like to know how these factors apply to you, please contact us.
