A Self-Managed Super Fund may suit an investor with a significant amount of funds in his or her super fund and a desire to be very “hands-on” in the investment process, with significant latitude in the type of investments that can be included.
Investing within a SMSF
The place to start with SMSF investing is the investment strategy. It would be a good idea to get advice from a financial advisor concerning this so that the strategy takes into account your personal risk profile, time to retirement and other matters related to your individual situation. This investment strategy will give you a range of percentages for how many various types of investments you can have in your SMSF.
The trustee is the one who actually owns the investments, holding them in trust for the benefit of the members of the super fund.
One reason why many people get a Self-Managed Super Fund is so that they can invest in real property. It can be either commercial or residential, but there are very strict limitations on the use of residential properties. Neither you nor a close relative can live in them, nor can you benefit from them in any way other than the investment return. For example, if your Self-Managed Super Fund owns a beach house that is rented out, you would not be allowed to stay in it during the times it was otherwise vacant. Furthermore your SMSF would not be allowed to purchase a residential property from yourself or a close relative.
Having said all of that, residential property can be a good investment choice for some investors with Self-Managed Super Funds. It’s something that they are familiar with, produces a reasonable income, and if the SMSF sells it in retirement, it could do so free of capital gains tax under current laws in most situations.
A further benefit to investing in property within a Self-Managed Super Fund is that it can be structured in such a way that the trustee can get a loan to assist in the purchase of the property. Over time the loan is paid off and the SMSF ends up owning the property in full.
Free SMSF Borrowing eBook
Get a copy of our free eBook, SMSF Borrowing for more information on what Self-Managed Super Funds are, whom they may suit and how to invest in property through one. Detailed information is provided on SMSF loans for funding the purchase of an investment property, as well as specifics on how they must be set up. A SMSF loan is different than a typical mortgage or home loan, and even the structure within the fund doing the borrowing is unique.
An important note about advice
As a lender, State Custodians has a credit licence under ASIC. They can therefore provide you with advice regarding loans, including SMSF loans. Keep in mind, however, that any advice that we provide you through our website is general advice. It doesn’t take into consideration your situation or individual circumstances. You should seek professional advice from a variety of people with regard to the use of a Self-Managed Superannuation Fund, including an accountant, financial adviser, a credit manager and possibly a lawyer. Further details are included in the eBook mentioned above.
With regard to financial products we have done our best not to give you any advice. That is to say, we have not directed you towards any particular financial product or any class of financial products. You should seek such advice from a licensed financial advisor.