Property appeal for new breed of SMSF trustees

Borrowing to purchase within a self managed super fund (SMSF) will become an increasingly popular option for a "new breed" of younger, higher balance SMSF trustees, according to Multiport technical services director Philip La Greca.

Super balances are increasing more quickly than at any stage in the past now that people are working from the start of their careers with the 9 per cent superannuation guarantee (SG), and would increase more dramatically if the SG is raised to 12 per cent.

The option to gear property into an SMSF is becoming more popular but presents a particularly attractive option for younger couples, La Greca said.

Rather than maintaining separate industry or retail fund balances, a couple looking to buy an investment property could pool their super savings into a single SMSF and use the funds to buy a property.

The option would be less effective tax-wise if the property is highly geared, but if trustees have most of the purchase price it can be a very effective option, La Greca said.

It is also useful for trustees who can't afford to buy a property outside super (for example, due to other financial commitments) but have a significant balance, especially when it is pooled together as a couple.

Another growth area for SMSFs will be small business owners looking to put their business premises within their SMSF, he said.

Another advantage with this strategy is when the business owner is looking to retire and sell the business, they have the option of selling the business and premises together, or retaining the premises within super and just selling the business, which can then pay rent back into the SMSF, La Greca said.

Update: This story has been amended. A previous version incorrectly stated a couple could use an SMSF to purchase their first home.