EvolveMySuper

Over the last month I have received numerous emails from people asking questions relating to buying property with a SMSF utilising the super borrowing opportunity.

This article reviews the five most common questions I am asked.

Can a SMSF renovate a property that has been purchased under a limited recourse loan arrangement?
Following the changes made to the super borrowing laws that came into effect on the 7th of July 2010, one of the major items which both investors and advisers have been chasing clarification on is whether a property can be renovated when purchased under such an arrangement.

Utilising a loan from a related party of the SMSF instead of, or in addition to, can provide the following advantages when compared to obtaining a limited recourse loan from a bank:

Reduced upfront costs, reduced ongoing costs, flexible repayment terms, interest is paid to a related party rather than banks with multi-billion dollar profits, younger SMSF members can inject capital to purchase property without it being trapped until they retire, high value assets can be transferred to a SMSF without exceeding the contribution caps and tax deductible contributions can be spread over a number of years and the ability to correctly and legally develop property within a SMSF using borrowings.

The ATO has recently released a series of interpretative decisions about SMSFs using limited recourse loans to acquire investments such as residential and commercial investment properties.

This article gives a brief plain English summary of what each ruling is about and the impact it has on investors looking to use their super to buy property.

Using negatively geared property has been a favourite strategy of Australians trying to build wealth for a long time – but is this strategy still the best option now that you can use your super as the deposit to acquire both residential and commercial property?