Self-managed super funds (SMSF) can invest in numerous assets. This freedom is just one reason why SMSFs have become so popular in Australia over the years.
Some examples of common SMSF investments include term deposits, Australian shares, insurance policies and debt securities.
However, one of the most popular, especially in recent years, is property.
Buying an investment home through an SMSF gives fund members the chance to benefit from rental yields and capital growth, and unlike more complicated asset options, real estate is an investment many people can easily wrap their heads around.
Perhaps best of all, SMSFs can use special loans to purchase property. SMSF loans make it possible for fund members to acquire assets they may not otherwise be able to afford on their own.
Of course, there are rules SMSF members must keep in mind, regardless of what asset they choose to invest in.
What assets are off limits?
Any asset an SMSF purchases must be at “arm’s length”, meaning it must reflect true market value and true market rate of return.
The Australian Taxation Office (ATO) also makes it very clear that SMSFs are not to lend money to fund members or their relatives except in very specific instances. Likewise, SMSFs are not allowed to acquire assets from related parties to the fund.
Investments are also not allowed to either directly or indirectly provide fund members with financial benefits before they retire, according to the ATO.
This means any property bought within the SMSF can only be used for providing retirement benefits, and must not come from, be lived in or rented out to a related party of the fund.
If you’d like to know more about how SMSF loans can help you with your retirement planning goals, contact the team at Redrock.