Real-Life Example: Buying Property Through a Self-Managed Super Fund

Background

A married couple with a combined super balance of $300,000 wanted to diversify their retirement savings by investing in real estate. With no prior property experience, they chose to establish a Self-Managed Super Fund (SMSF) for greater control over their investments.

Setting Up the SMSF

• Fund Establishment: Rolled over both superannuation accounts and paid setup costs (~$3,500) from the fund.
• Property Acquisitions: Purchased two residential properties for $502,000 and $455,000, retaining $50,000 in cash.
• Borrowing Strategy: Utilised a Limited Recourse Borrowing Arrangement (LRBA) to finance the remainder, with the SMSF holding security over the properties.
• Regulatory Compliance: Met the sole-purpose test, arranged market-rate leases, and appointed independent property managers.

Results After 10 Years

• Capital Growth: Combined property value rose to over $1.1 million.
• Rental Income: Generated steady rental returns taxed at 15%, reducing to 0% in pension phase.
• Retirement Income Boost: Projected $100,000 per year from fully owned properties in retirement.

Key Takeaways

• Expert Guidance: Professional advice is essential for legal compliance and optimal structuring.
• Long-Term Strategy: SMSF property investment is a multi-year commitment—plan accordingly.
• Risk Management: Understand setup fees, borrowing rules and ongoing compliance requirements.

For more real-life strategies, visit the ATO Case Studies.

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