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Secondly, he suggests running the
numbers very carefully to know exactly
how much you can borrow, the amount
your fund will have to tip in as a deposit,
ongoing costs and any shortfall the fund
will have to cover.
“Thirdly, I think it’s worth targeting low
maintenance properties. Make sure you’re
not buying something that needs a lot of
upkeep and requires you tipping in a heap
of cash to maintain or repair.”
A property that’s structurally sound
and in good condition will stand the
test of time more than something that’s
already a bit tired and rough around the
edges. After all, a SMSF purchase is the
definition of buy and hold – only you’re
likely to be holding it for a very long time.
¿ WHERE SHOULD I LOOK?
The area where you choose to buy a
property inside super depends on a few
factors, Freudigmann says. How long
you plan to hold the property – usually
driven by your current age and intended
retirement age – may dictate your search.
If you’ve got a decade or two up your
sleeve, you might not have to be as
aggressive when it comes to identifying
growth areas. A gradual performer,
usually more of a sure thing, could
If you’re less than 10 years from calling it
a day at work, you might be keen to target
a higher growth area. Or perhaps the
closeness to retirement has you thinking
about the benefits of rental income.
“Like anything, it depends on your
personal circumstances and the strategy
you’ve devised,” Freudigmann says.
“I’d suggest looking at a property that’s
renovated or near new – not necessarily
new, as that’ll typically come at a
premium – in a good area with potential
¿ HOW IMPORTANT IS CASH FLOW?
Freudigmann believes cash flow is an
important consideration when it comes to
buying property inside super. He suggests
looking for a rental income that’ll cover
most of the expenses you’ll incur.
“You don’t want the money in your super
fund or the ongoing contributions to be
eaten up by a hugely negatively geared
property,” he says.
The trick is to find a harmonious
balance between long-term growth and a
If there’s a shortfall, Hartman says you’d
be more likely to contribute the difference
yourself rather than have the fund’s other
income cover it.
“Let’s say you’ve got a property that’s
negatively geared by $10,000 per year.
If you contribute that through salary
sacrifice, it reduces your personal income
by that amount so therefore you declare
“Effectively you’ve reduced your own
taxable income at the marginal tax
rate and reduced the tax payable by
¿ DOES MY AGE IMPACT THE SELECTION?
Depending on how old you are when you
establish a fund and use it to invest in
property, there might be some further
considerations on the type of property you
buy, Freudigmann says.
For example, if you’re in your late 40s
or 50s, he suggests considering putting
down a larger deposit while you’re still in
Ready to go... but where?
Like many Australians, Richard (not his
real name) has watched with interest
as the popularity of self-managed
superannuation funds (SMSF) has soared.
He’s long been a passionate property
investor, owning a few rentals across
Brisbane and one in Murray Bridge, about
an hour outside of Adelaide. When he
investigated SMSFs and became aware of
the big tax benefits on offer, he was keen
to jump in.
“My partner and I went to a property
seminar and there was a financial
planner there who spoke about SMSFs,”
From there, the couple met with an
accountant who specialised in SMSFs and
he handled the establishment of their
However that was about 12 months
ago now and they’re still yet to make a
purchase inside it.
Originally they toyed with the idea
of using it to buy a National Rental
Affordability Scheme (NRAS) property,
given the more than $100,000 worth
of tax and cash incentives that such an
“We did a review of our financial
circumstances with a financial planner
and realised that the NRAS tax benefits
would be better applied to my partner’s
salary rather than a super fund.
“She didn’t own any properties and was
paying a swag of tax, so it made sense to
buy the NRAS unit in her name, which
They began to look at other inner-city
units but soon discovered that the often
exorbitant body corporate fees would eat
up their super balance pretty quickly.
Richard and his partner are able to tip
in $50,000 each to their SMSF, giving
them a fund balance of $100,000. With a
20 per cent deposit and costs, that gives
them a budget of just under $500,000
to spend on a property, he says.
“I’d also be happy to tip in another
$20,000 to $30,000 as a loan to the
fund in the short term, if need be. You
can loan your fund money interest-free
for a period if you need to.
“We’ve had another look at NRAS
properties but there isn’t much about at
the moment. We’ve looked at a duplex
property in Brisbane’s middle suburbs
too. We’re not sure what we’ll go with and
whether to target high growth or a mix of
cash flow and growth.”
Like many newcomers to SMSFs, they
have more questions than personal
criteria. Ideally, they’ll buy something
within 10 kilometres of the CBD.
First things first, they’ll probably work
out the sort of income they’d ideally like
to have when in retirement phase. From
there, Richard says they could “work
backwards” to come up with a strategy
that best utilises the ready-to-go SMSF.
“We’re keen to take advantage of the low
tax environment when we do retire.”
The trick is to find a harmonious
balance between long-term growth
and a decent income.
FEATURE // BEGINNERS’ GUIDE TO SMSFs
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