More and more
investors, and particularly Baby Boomers, are using their Self-Managed Super
Fund (SMSF) as a vehicle to buy an investment property.
So, I’d like to share some of the most
common mistakes people are making so you can avoid them.
Debt
YourSelf-Managed Superannuation
Fund(SMSF) can borrow money to:
a) Purchase a property (including all
acquisition costs),
b) Pay for repairs and maintenance and
c) Capitalise interest.
Youcannotuse borrowed funds to improve the property.
Improvements include additions, granny
flat, extensions, etc.
For these activities cash resources of
the fund must be used.
It is critical to keep good records in your SMSF
to identify whether borrowed funds or internal cash is used.
When debt is used, the property must be
held in a Holding Trust with a Corporate Trustee and not directly in the SMSF.
Apart from the legislative requirement to
not hold the property in the SMSF there are real and practical reasons why you
would not want to hold it in the SMSF.
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out
Jason Gwerder
Tuesday, 27 April 2021
