November 22, 2015

SMSF Property Investment Considerations

An SMSF or self managed super fund is a type of superannuation scheme that’s designed to provide retirement income to members who are also the beneficiaries. 

With an SMSF you are in control of your fund’s investments and you can buy residential or commercial property, as long as the sole purpose of this investment is to provide retirement benefits to your members, or to their dependants if a member dies before retirement.

An SMSF property investment has to be planned carefully and can only be undertaken if the SMSF investment strategy allows for it. 

When setting up an SMSF there are very specific requirements to fulfil to allow for property investment inside your superannuation fund to occur.

Generally, we advocate the use of a Company to run your retirement vehicle if you
plan to invest in property in super. Some of the other requirements you will need to obtain when setting an SMSF to invest in property are:

An Australian Business Number (ABN)
Tax File Number (TFN)
Bank account, which needs to be in the fund’s name; contributions can be made through it and it can pay the fund’s expenses

Before you can start making investment decisions for your fund, including SMSF property investment, you will need to develop and implement an investment strategy.

An SMSF investment strategy is the responsibility of trustees and is a written, detailed financial plan, outlining the investment objectives and goals of your fund as well as what types of investments your fund can make.
Here are some of the vital things to consider when developing and reviewing your SMSF investment strategy, so that everything will be in accordance with strict SMSF rules and regulations:

1. It’s imperative to have extensive knowledge of the personal circumstances of all the members of the fund. As mentioned previously, the sole purpose of the fund is to provide retirement benefits to your members, or to their dependants if a member dies before retirement and your investment decisions must meet and support this. Important variables to take into account are each member’s age, retirement needs, personal circumstances and risk tolerance.

2. Diversification of funds’ assets – a diversified investment portfolio is a smart way to minimise investment risk.

3. Liquidity of assets.

4. The fund’s ability to pay benefits and all the other costs it incurs should be studied as well.

5. Insurance needs of all the members of the fund and whether the insurance should be held in the SMSF must be considered.

Given these conditions/considerations, it is clear that SMSF Property Investment needs to be thoroughly thought out. If this process is proving to be quite overwhelming to manage, seek help from experienced, licensed financial professionals who specialise in SMSFs.

About the author: Oliver Finney is an enthusiast of the real estate industry who loves to continuously learn and share knowledge as well about the vast and comprehensive world of the real estate business, off and online. Indeed, he is an avid real estate enthusiast and has recently made the final step to earning his real estate license. He visits sites like