If you have made the decision to invest your super fund in property using an SMSF property service, being aware of the mistakes that can make your investment less secure is useful. From the 2007 laws that permitted Australians to invest in superannuation property to 2012, the SMSF market took over 33% of Australia’s super funds. Despite its popularity, SMSF property investment is not always approached as cautiously as possible. Here are three mistakes you can avoid in order to enhance your investment.
You Can Only Purchase Property, Not Vacant Land
The 2007 law only permits the purchase of a ready-built property. If you are looking to purchase vacant land in order to benefit from the property development market, an SMSF investment is not for you. You can, however, invest in ‘real’ existing property. This includes residential and commercial buildings, industrial property, and some farms. Complex laws govern the purchase of farms, which is why seeking out an SMSF property service is essential.
You Cannot Purchase Property In Your Name
Your property purchase comes under the name of the SMSF fund, not yours. Many SMSF fund holders arrive at a property deal, sign the contracts, and later find that they are financially liable for the contract’s completion rather than the SMSF fund itself. As SMSF property purchases usually come with higher loan interest rates, but greater tax benefits, banks need to be sure of what they are lending the property against. In addition to this, both the person who will benefit from the property and the SMSF fund must exist before the contract can be completed. This means the SMSF trustee must be explicitly stated on official SMSF documentation.
You Cannot Purchase SMSF Property From a Related Party
If you want to buy property with SMSF, you cannot purchase your own assets. Similarly, you cannot purchase a property from someone who is classed as a related part. The laws surrounding these definitions are complex, but this usually means someone you are financially tied to. For example, a business partner or spouse.
While this may make SMSF property purchases seem complex, they are still manageable with the use of an SMSF property service. Eliminating the legal and financial complexities through the use of basic guidance allows you to direct your super towards a steady investment. For most people, a simple consultation is enough to determine whether SMSF property investments are for them.
