What to Consider When Using Your Super for an Investment Property

What to Consider When Using Your Super for an Investment Property

Using your super for an investment property can be a great strategy to increase your net worth over the long term. 

Therefore, it must be made with great care and planning. Moreover, there are currently only a few reasons that allow you to use super to purchase an investment property.  Here are some major considerations you need to think about before taking this step.  

What to Keep in Mind  

An important thing you need to know is that purchasing a property through a self-managed super fund comes with much higher setup costs. With that, it’s not smart to tie up most of your super to a liquid asset.  

Therefore, if you only have superannuation in real estate, you need to consider whether you have enough cash left in your account to cover pensions. Secondly, if you have all of your money tied up in real estate, you won’t be able to access it fast enough if you are diagnosed with a terminal illness. 

The Benefits of Buying an Investment Property Inside a Superannuation  

  • Get Funds for Deposit  

The major advantage of buying a property inside superannuation is the ability to use your super for cash. This is because it is the easiest way to get the necessary deposit for buying a property.  

With that, you won’t need to shop around for a financial institution and wait for approval to buy a property.  

You choose the property you are going to buy, and the money goes directly from your super to the seller.  

  • Reduce Tax Paid on Investment Earnings  

Superannuation has favourable tax treatment, with gains from a property being taxed at a lower rate than when an individual pays tax on the same income.  

So, if you have all of your money in real estate, you might be able to enjoy tax-deferred growth. This is because you won’t be taxed on income that you earn from the asset while you’re living in it, or until you sell the property.  

  • Get Asset Protection  

A major advantage of having your superannuation in real estate is asset protection. It means that you can have the best of both worlds. You have the potential to build a high-performing real estate portfolio while still having the safety of your money through super.  

  • Buy Your Business Premises Instead of Renting  

If you have a business, you can use super to buy your business premises instead of renting them. This can be an excellent strategy to grow your business, as you have the flexibility to purchase a property at the right time, and at the right location.  

Should You Do It?  

Overall, buying an investment property inside superannuation is a great investment strategy for some individuals. However, you shouldn’t buy into the idea just because it’s a great way to save. 

You need to consider the pros and cons of buying a property through your super, and suit it to your personal circumstances. For one, you should be mindful of the limitations that it might have on your other retirement.  

Wardle Partners have self-managed super fund accountants that can guide you in making the right decision. Whether you choose to invest in a property using your super, we can get you started. Contact us

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