Funding Property In Self-managed Super

Date: 01/02/2011

Having your self-managed super fund invest in residential property is attractive for tax reasons but subject to considerable restrictions - here's a more flexible way of doing it.

Investing in residential property by self-managed super funds can be very attractive, specially from a tax point of view, but it's hedged about with restrictions and limitations. A more flexible alternative to the usual methods of borrowing to invest is for the super fund and a related entity, like a family trust, to jointly set up a unit trust to buy the property. The family trust can get a tax deduction on the interest it pays on its borrowing and can progressively sell its units to the super fund, which eventually will then own the property outright. If it is in pension mode by the time it wishes to sell the property, it will then be in a tax-free environment so far as Capital gains Tax is concerned.