When considering a Self-Managed Superannuation Fund as a vehicle for investments there are many factors to consider including rules and regulations that must be adhered to.
One of the popular options for investments is investing into property.
ASIC generally recommends a minimum for setting up a SMSF is $200,000 to $300,000.
Firstly, a SMSF fund can have up to 4 trustees keeping in mind all trustees are personally liable for any decisions made by the funds.
The annual costs to consider with a SMSF are initial set up costs, accountancy fees, auditing fees, costs for a trust deed, insurance costs, and investment fees.
The minimum amount requirements is generally 20-25% of the property value as a deposit for property investments.
Setup fees are usually percentage based depending on the total balance.
There are different rules for residential and commercial property investments via an SMSF.
LRBA – Limited Recourse Borrowing Arrangement is the option to borrow property with an SMSF.
When considering property as the main asset for capital growth and income the issue is the lack of diversification.
There are Capital Gains Tax advantages if residential property is sold in the accumulation phase.
Costs to consider with a SMSF and property are maintenance costs, landlord insurance, rental income, the situation where the property becomes untenanted for a period of time. Whether the rent will be enough to cover future costs of upkeep.
There are important things to consider when investing in property – understanding what the market is doing and where the location of the property is.
When considering properties there are many areas to factor; the insurances including landlord, weather insurance, maintenance costs, tenants. The tenants can’t be family members.
In summary the discussion should be had with an advisor to assess whether a SMSF is the most suitable option for you to meet the objectives and goals for retirement.
If you require help with understanding what’s best for you, the team at Superannuation Advice Australia can help. Contact us today!