SMSF Property Loans: Are They Worth It?

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SMSF is a super fund where the members are also the trustees. The fund can have up to four trustees, they run the fund and they are responsible for following the super laws. The super laws are regulated by the ATO. The members can get hire professionals to help them out when running their SMSF. SMSFs have many benefits and offer quite the pension when you get to that point. But, they aren’t made for everyone and not everyone can run such a fund. If you have started an SMSF already, there are a lot of advantages you can get from it. The main one being that you can take out SMSF property loans. Let’s explain what the loans are, how they work and how you can benefit from borrowing for purchasing a property.

Until the past couple of years, people weren’t able to borrow money in order to buy property. They were able to buy property, but they weren’t able to get a loan. As that changed many options became available. However, an important thing that must be mentioned is that residential property can’t be purchased through an SMSF. You can only purchase commercial property and you can’t use it for residential purposes, such as living there. However, in some rare cases, it is allowed. Usually, people buy commercial property using their SMSF. Then they lease it back through their business. But, there are strict rules that they follow and if they are broken there are consequences. You can’t rent the business to friends or family members. The rent must be proportional to the value of the business and you can’t skip paying rent if you’re leasing it to yourself.

The biggest benefit of SMSF property loans is that they are a great way to buy a property if you can’t purchase it in your name. Another big benefit and a big reason most people want to buy commercial property through an SMSF are that there is less tax to pay. Paying less tax means turning a bigger profit and everyone wants that. Plus, a percent of the profits go towards the pension of the owner. Meaning, it’s very beneficial for the owners of the business. Plus, it’s a great way for them to widen the range of their investments. If the owner chooses to sell the asset while they have reached the pension phase in their SMSF, it will be free of any taxes.

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