How to use super as equity to buy property

Super need not sit idly in your super fund. And you needn't feel like your super is untouchable. A particularly popular method for taking control of your super is to put it into a self managed super fund and then use those funds for your own investments. You may want to consider buying property with your super, for instance. Here's what you need to know.

 

Buying property with super

It is possible to use your superannuation as equity to purchase property by having a self managed super fund. It’s particularly popular these days. This is due in part to the concessional tax benefits and the attraction of being in greater personal control of your super.

Think carefully about the cost

While the benefits of self managed super funds are clear, remember there are costs involved in setting up your SMSF and maintaining it. With an SMSF, you need to be on your game: think tax time, keeping records, administration and audits.

The rule on renovations

Self managed super funds come with rules. For instance, you can’t borrow with the intention to construct a new investment property. And if you’re hoping to undertake renovations for profit, think again. There are strict rules about the types of repairs and improvements.

What’s this arms length business?

One of the serious rules regarding equity and super is that the purchase of property must be at ‘arms length’. By this, the Australian Tax Office means you cannot benefit from the property directly until you formally retire. So, you can’t live in it.

Know the ins and outs

Self managed super funds are more and more popular, but they are also complicated. Having a financial planner's support with research and decision-making about your SMSF will ensure you're aware of all the necessities and relevant laws as you embark on using your super as equity.