SMSFand property

Hi all
still dabbling around the edges of purchasing a property with our SMSF (making sure I have alll my info) and I have question that I was wondering if you had an answer to??
We are looking at property around the $350K mark. Maybe more depending on the potential rent acheivable.

I am leaning towards a new (ish) unit in an area with lots of growth potential and infastructure both happening and planned.

My question is would it be better to buy a new unit (which obviously has strata fees as an added expense) or would a house further out be a better long term strategy as the stats have houses growing at a higher rate than units??

I will look forward to your replies
Cheers

 

I'd buy a house. The depreciation benefits from a new(ish) unit will be wasted in your smsf.

Cheers
N

 

Thanks Nigel for your reply.

I guess then we couldn't sell our existing IP (about 15 years old) to our super fund and purchase the new unit for ourselves to utilise the depreciation???

I guess the costs associated with the sale would outweigh the benefits of the depreciation??? Sorry - just thinking out loud!!! I haven't got a clue as to the costs that are associated with this .... just a few scenarios that I am thinking through!!

I'm not sure about the house though, rather than the unit - only because the the houses aren't in "nice" areas..... so the type of tenant I would attract and the rent I would achieve may not be as good. IMHO

Anyway thanks for your input
Cheers

 

Hi there

Houses vs units - both have merits but don't make the mistake of simply purchasing new for the depreciation benefits. It all comes back to haunt when you sell, after all.

Have you spoken to someone about purchasing via a SMSF? It is complex so you need to really know what you're doing and the risks, limitations etc. I'd suggest speaking to your accountant first and going from there.

 

Hi Pestgirl

Your guess is correct, your SMSF can't purchase your existing IP (unless its deemed to be "business real property") as you would be in breach of the related party rules within the relevant SIS Act legislation.

As Jacque stated, best see your accountant first.

 

Pestgirl

You have received some good responses to your questions.

I kinda disagree with Nigel's comment regarding depreciation deductions being wasted within an SMSF. I see where he is coming from - typically individual marginal tax rates for property investors are higher than the 15% tax within a SMSF, and thus greater tax benefit outside of super.

However, if you salary sacrifice you can get the best of both worlds: You save tax personally through lower taxable income, and the extra contribution income flowing into the SMSF gets absorbed by all the depreciation deductions within the SMSF.

There have been a few good posts on InvestEd to help you - especially:
www.invested.com.au/6/our-first-smsf-purchase-step-step-36783/
from Billv.

Feel free to throw any questions at us.

SM

 

That's a difficult decision.
For me it would depend on what other assets I have outside super because I'd like to diversify.
With the new unit, you'll get higher rent plus higher depreciation. If you did go for a house try to compensate by finding something with higher yields or with development potential.
Even putting a granny flat on the block can make a big difference to your bottom line