Property and self-managed superannuation funds

Property and self-managed superannuation fundsProperty can be an attractive proposition for your self-managed superannuation fund, but there are some important considerations that apply from 1 July, says Moore Stephens’ director Simon Alford.Alford says the use of self-managed superannuation funds (SMSFs) to acquire property has gained popularity in recent years, partly due to their ability to borrow.”There are several tax advantages associated with purchasing property through SMSFs. These include a flat rate of tax of 15 per cent on earnings and an effective rate of tax of 10 per cent on capital gains on assets held for more than 12 months,” Alford explains. To the extent that an asset in an SMSF is used to fund pensions, the earnings from those assets, including any capital gains, are exempt from tax, although Alford notes that a cap of $1.6 million applies to assets that can be used to fund pensions from 1 July. “Currently, a non-concessional contributions cap of $180,000 applies to all people eligible to make superannuation contributions, with those under age 65 also able to bring forward the next two years’ contributions, allowing each member to contribute up to $540,000 in a single year,” he adds. From 1 July, changes applying to superannuation include:A reduction in the non-concessional contribution cap to $100,000 per annum or $300,000 where the ‘bring forward provision’ is appliedA prohibition on making non-concessional contributions when a member’s total superannuation balance exceeds $1.6 million. Members with a total superannuation balance of greater than $1.4 million will also be restricted in the amount of non-concessional contributions that they can make. There are several benefits of making non-concessional contributions now: “to provide your SMSF with liquidity, to minimise tax on the payment of death benefits and to equalise member benefits between spouses,” Alford says”Under the existing contribution caps, it may be possible for individuals to transfer commercial property to their SMSF, and in specific circumstances, small business capital gains tax concessions and stamp duty concessions may apply. “We recommend people interested in using superannuation to purchase property should consider how the changes from 1 July will impact them and take appropriate action now,” Alford advises.Moore Stephens is an audit, accounting, tax and advisory firm that provides advice and practical solutions. Learn more.Information provided in this article is general in nature and does not constitute financial advice. You should consult your financial planner prior to making any investment decisions.