There are 5 major ownership structures in which you can hold investment properties, and each one has its pro’s and con’s. The fifth and final article is on investment property held in SMSF’s, not a structure that is to be taken lightly, but one that can be very advantageous for the right investor.
The governing rules around SMSF’s borrowing to purchase property are quite strict and mean that this is not for everyone. This does not mean it is not a great structure, for the right person it can be an ideal way to increase your superannuation balance while gaining tax advantages.
Depending on your situation, you may be able to salary sacrifice additional contributions into your SMSF which are used to pay down your loan principle. In simple terms, this means you are getting a tax deduction for principal loan repayments – there is no other structure that allows you to do this. There is also the bonus of SMSF income being tax free once you reach 60, so you can sell your property capital gains tax free.
If you are a small business owner, a SMSF can also be an excellent way to get you into your own commercial premises. Your SMSF purchases the property and you pay rent to the SMSF, increasing your superannuation balance rather than paying a third party.
The latest changes to superannuation laws will mean you need to plan carefully to ensure you don’t have any issues with the new caps, it doesn’t mean you should rule out an SMSF for you next property purchase.
Short and long term plans, lifestyle, tax advantages and capital protection all need to be taken into consideration when determining the best structure to own your investment property in. As always, remember to speak to us on 03 8393 1000 before you purchase to ensure your ownership structure is suited to your individual needs.
Rebecca Mackie, Partner, Paris Financial
5 Investment Property Ownership Structures Article Series