Self-managed super funds (SMSFs) are increasingly popular in Australia. This trend makes it possible for people to use their retirement savings to invest in residential property.
Generally, an SMSF contributes a deposit and borrows the remaining funds needed to buy an SMSF property. You can also look for the leading smsf tax return via an online source.
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The article explains some of the benefits of the loan for real estate investing SMSF.
1. A greater investment choice
Without borrow, most SMSFs are simply not large enough to allow a property at all. Others may be quite large but would need to use a high proportion of their funds to the left in a position where their investments are not sufficiently diversified.
2. Leveraged Investment
Borrowing to purchase property may allow SMSFs to pull their assets left for further growth.
3. Negative gearing to reduce tax
In many cases, real estate investment will be negatively oriented. It is, after taking into account the interest on loans, ownership costs, and amortization of the property is a tax loss. This tax loss can be offset by other taxable income of the SMSF to reduce the tax payable by the SMSF.
4. Capital gains tax reduction
The taxation of capital gains realized by SMSFs is different from the rules of "great outdoors". An SMSF would pay 15% on capital gains for goods sold within 12 months, and 10% when the property is held for more than 12 months.
But mostly no tax on capital gains would be payable if the property is sold when the SMSF is in the pension phase.