Home Loan Advice Centre helps borrowers Australia-wide. We specialise in Sydney and NSW and regularly help clients in remote areas and other states. Feel free to contact us on 02-9210-1000 or 1300-729-177 to see how we can help you.
Self Manged Super Fund loans
If you self-manage your super fund you may be able to purchase property within that fund. Self-managed super fund loans are more complex than standard home loans but may be a way for an individual to purchase property without haven’t to personally put up a deposit. Superannuation is essentially an Australian “forced savings plan” and individuals are able to self-manage the funds within their superannuation by converting their superannuation to a self-managed super fund plan.
Pros And Cons
- Use funds within super as your deposit. You can avoid the need to personallyprovide a deposit to purchase a property because the deposit comes from the funds you have within your superannuation.
- Tax effectiveness. Income earned within super is taxed at a reduced tax rate and usually lower than an individual’s marginal tax rate from personal earnings. Keeping the property long term until retirement when your super goes into pension phase may enable a sale without capital gains tax nor any tax on rental income from the property.
- Additional costs incurred, usually in the thousands of dollars, to set up the required trust structures required by lenders.
- No negative gearing benefit against your personal income. The negative gearing tax offset only applies to income earned within super and can’t be applied to any personal income earned.
- Lenders may require or prefer corporate trustee structure and interest rate may not be as low as standard owner occupied home loan interest rates.
- Limited loan to value ratios.
- Higher deposit required.
- Restrictions – various additional rules and restrictions (some listed below).
Rules And Restrictions
Other rules and restrictions …
- The loan must be to purchase a residential property.
- It must be for investment purposes – the law does not permit owner occupiers.
- The only security allowed is a mortgage over the purchased property.
- Loans limited to 70% – 80% dependent on the lender therefore purchase within self-managed super funds is only realistic with super funds with substantial balances.
- Trusts must be set up (usually by your solicitor or accountant to the satisfaction of lender rules)
- Self-managed super fund trustees can only acquire residential property from unrelated parties