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Improve your lifestyle in retirement:Ken Raiss - Non Executive Director, Chan & Naylor

Four steps to maximise ‘negatively gearing property in Super’ strategy

With the ability to negatively gear property in superannuation while still at work against your personal tax, more people are looking at this strategy to improve their lifestyle in retirement.   This ability to buy property, which will be tax free in your retirement, can greatly boost your future income. However, many people take shortcuts which reduces the upside of this strategy and unfortunately,  in some cases, unintended costs are triggered. To maximise this strategy, four key steps are necessary.

  1. Talk to your specialist SMSF accountant or financial planner to ensure the property you are looking at is allowable. In summary, borrowings can be used to purchase, repair, and fund interest expenses. Cosmetic renovations (not an improvement) are permitted with borrowings and while you can improve a property by adding floor space, granny flat etc this must be done using SMSF cash. Off the plan purchases are allowable but not the purchase of land and the subsequent construction of the building. During this talk you can discuss the rollover from other super funds and any insurances etc., you may need.
  2. Get pre-approved finance. In many instances the banks will require a financial planner to sign off on your SMSF strategy, but this is normally a relatively simple thing. You may need to top up your super if you do not have sufficient deposit etc., but you can lend money to your SMSF from say cash or equity from outside super. As this is not a super contribution there is no limit on the amount and it can be repaid prior to retirement.
  3. After steps one and two are complete you can then put in place the paperwork. Caution is needed as not all suppliers of the required documents are equally skilled. If you are lending money to your SMSF then you need these documents and it is also advisable to complete additional documents as in many states a future second stamp duty on the property may be payable if all required documents are not completed.
    Chan & Naylor documents start off with our Enduring Family Superannuation Fund™  deed and is supported with all the other necessary documentation.
  4. Now the fun stuff – go out and secure the property.

The above may look intimidating but it is just administration which your specialty advisor will help you with and for most people, it’s no more daunting than the process of purchasing the property; it’s simply just some “extra paperwork”. The ability to leverage property in super can be very beneficial but ensure you follow these relatively simple rules to maximise your benefits.

Related:  Aged Care - Making an Informed Decision

We are specialist property accountants, finance and SMSF advisors and as such can assist you with steps (1), (2) and (3) to ensure you do not make unecessary errors and maximise your superannuation benefits.

If you would like to discuss this strategy for your situation with a Senior Partner, Finance Strategist or Financial Planner at Chan & Naylor, please send us an email or submit your request for a Free 10-15 minute obligation free phone call.

Ken Raiss,

Non Executive Director, Chan & Naylor

Disclaimer: This information does not take into account your individual objectives, financial situation and needs. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. The information contained in this article is given in good faith and is believed to be correct at the time of publication, but no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors or omissions (including responsibility to any person by reason of negligence) is accepted by Chan & Naylor, its’ officers, employees, directors or agents.

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