The Basics: SMSF & Property

Let’s get down to basics! In this short 90-seconds video, Ben briefly explains why superannuation is so important in Australia and the connection between Self-Funded Superannuation Fund (SMSF) and Property.

It’s important to remember, though, that while the video shares helpful information, it’s not telling you to invest in a SMSF. Everyone’s situation is different, so please get qualified and tailored professional advice before you make any investment decisions.

Let’s break down the basics of superannuation and make understanding it a breeze. Enjoy watching!

Transcript:

Let’s go back to the very, very basics of why there is superannuation.

The government needed to provide pensions. They realised that households will keep spending and there won’t be any money left over. So they set up a structure where money was shaved off from your wages and put into a super fund.

Now, in terms of a self-managed super fund, as opposed to going into a retailer industry fund, you now have the ability to set up your own fund. As part of setting up your own fund, you can have up to six members of that fund. And what was introduced several years back was this ability to potentially borrow money associated with the self-managed super fund.

That’s called Limited Recourse Borrowing Arrangements.

The members are the contributors and the trustees of the self-managed super fund in terms of setting up to actually borrow money to buy residential property. You need to have a relationship with the lender. They will need to take the security of the asset and you need to be able to run this through what’s known as a Holding Trust, where the title is held in that holding trust by the trustee.

Mortgage repayments will still come out of the contributions that are going into the self-managed super fund. And so effectively the fund itself isn’t borrowing, but through a structure, through these holding trusts.

It’s very different and there are slight tweaks in each state and territory so you must get specific advice in this area.

We are again saying that we’re sharing general knowledge only here. This is not a recommendation to invest inside a self-managed super fund and you should always consult your Financial Planner before making any investment decisions.

If you don’t have an existing experienced and qualified Financial Planner on your team and would like to speak to one, we’d be happy to have a chat with you. Simply request a free initial consultation here, and our team will be in touch to provide the guidance you need to navigate these important financial decisions.