We’re hearing that more clients are asking about using their Self-Managed Super Fund (SMSF) to invest in property. For our channel partners, it’s important to understand both the opportunities and challenges so you can have informed conversations. Here’s a practical breakdown of how SMSF property works, and how you can help your clients take advantage of it.
Advantages of SMSF Property Investment
1. Tax benefits
Rental income from SMSF property is taxed at a concessional rate of up to 15%, which can be far lower than your clients’ personal tax rates. Once the fund reaches the pension phase, both income and capital gains may even become tax-free – a powerful incentive for long-term investors.
2. Leverage
SMSFs can use borrowings to purchase property. This allows clients to access higher-value assets than they could with cash alone, creating potential to accelerate wealth building when paired with the right strategy.
3. Control and strategy alignment
Trustees have control over investment decisions, meaning your clients can choose property that directly supports their retirement strategy and long-term goals. For example, targeting growth corridors or stable rental markets can help balance income needs with future capital growth.
4. Diversification
Property adds a different asset class to an SMSF portfolio, helping clients reduce reliance on shares or managed funds. This spreads risk and can provide more consistent returns across different market conditions.
5. Long-term focus
Superannuation is designed with retirement in mind, and property is naturally a long-term investment. This alignment makes residential property a strong fit for SMSFs, offering steady income and potential for capital growth over decades.
Disadvantages of SMSF Property Investment
1. High entry costs
Property requires substantial upfront capital. Deposits, stamp duty, legal fees, and other acquisition costs can make it difficult for clients with smaller balances to enter the market.
2. Borrowing restrictions
SMSFs can borrow to buy property, but only under strict rules, such as the Limited Recourse Borrowing Arrangement (LRBA) framework. These restrictions can limit flexibility and must be managed carefully to remain compliant.
3. Regulatory complexity
SMSFs face strict compliance requirements. For instance, residential property cannot be rented to related parties, and trustees must keep thorough records. Mistakes or oversights can lead to significant penalties.
What This Means for You
Your role is to help clients weigh up whether SMSF property is the right move for their retirement strategy. For some, the benefits will align perfectly; for others, the entry costs or compliance hurdles may tip the scales the other way.
Where ALC can support is by giving you fit-for-purpose, SMSF-compliant stock that’s ready when your clients are. That way, instead of spending time sourcing or second-guessing properties, you can focus on strategy and advice – while we handle the supply side.
It’s about making SMSF property smoother, more efficient, and ultimately more rewarding for both you and your clients.
Want to explore SMSF-suited stock for your clients? Get in touch with our team today.
Key Takeaways for Client Conversations
- Ask: Does your client’s SMSF have the balance to cover deposits and costs?
- Check: Is your client open to long-term, less liquid investments?
- Discuss: How does property fit into your client’s broader retirement goals and diversification strategy?
- Provide: Quality, turnkey house and land packages that align with SMSF rules – that’s where ALC can support you.
