Super funds are usually a mystery to most Australians, but they can actually be an incredibly useful way of investing in property. But getting the right advice from a financial professional is crucial.

40% of Australians don’t know how much is in their superannuation fund, according to findings from the MLC Wealth Sentiment Survey in 2016.

This perhaps isn’t surprising given the long term nature of Superannuation. Most people put it off as something to think about later. The problem with that attitude is that by the time people turn their attention to their fund it can be too late to meaningfully improve their balance.

Investing the time to manage a fund years before retirement is crucial, and investing in property through a super fund can be an excellent way of utilising those funds. The key advantage of property over other investment assets is the long term stability.

Purchasing property through a super fund can be a great way to utilise your funds. Speaking to a financial adviser and finance professional first is essential.

Purchasing property through a super fund can be a great way to utilise your funds. Speaking to a financial adviser and finance professional first is essential.

“Property investment in a super fund is often favoured by people who don’t like seeing their super balance rise and fall with the share market” said Joe Virgona, Certified Financial Planner with Your Money Manager.

“In that regard it can be a good option for people who want some more control over their super.”

One of the key advantages of purchasing property through a SMSF is that the loan is paid off via not only the rental income, but also the super contributions.

That’s in addition to a buyers own income, although how much they can contribute will depend on the contribution caps in place. For example, for the 2016-2017 financial year anyone aged under 50 years would be able to make before tax contributions of up to $30,000 without incurring additional tax charges.

It is important to note that these restrictions are susceptible to changes in legislation and buyers need to speak to a qualified financial expert before making additional contributions.

Setting up the appropriate structures to purchase with a SMSF will also require the expertise of an accountant and financial planner before the purchase can be made.

“An accountant will need to set up the structures for a self-managed super fund and a financial planner will need to prepare an investment strategy for the fund” said Virgona.

“There are initial costs to establish a self-managed super fund. It typically costs anywhere from $3,500 to $5,500 to establish the correct structures and get everything set up. In addition to the initial set-up, there are ongoing audit costs and obligations as well.”

Despite the initial costs, investing in property through a superfund can be a good option for some people, according to Virgona.

“It is an option for people to consider should they be looking at what they can do with their super fund. It can be a way to buy an investment property but as there are a number of restrictions to consider, investors should seek advice as the first step”.

Once the fund is properly set up, buying the right property is crucial.

“People would obviously be relying on these investments to fund their retirement, so it would need to be a quality investment” said NPB Buyer Advocate, Rob Di Vita.

“Having said that, the philosophy is that the investment would be sold off once someone is approaching retirement. It would be a long term hold, during which time the property would almost certainly appreciate.

Of course, having the peace of mind that a quality purchase has been made is always a good thing”.

National Property Buyers is not a financial adviser. Speak to a financial adviser and finance professionals before making any decisions. 

by Antony Bucello