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Property Investment and your SMSF

Property Investment and your SMSF

Property investment has recently become one of the favourite options used by many Australians as a part of their wealth creation strategies in their SMSFs (Self-Managed Super Funds). This may well be because of the massive fluctuations in the unstable global stock and FOREX markets. One of the most effective ways to boost the value of your retirement savings is to purchase a residential property inside your SMSF. This provides several tax benefits and a good return on investment and potential capital growth.

Why should you add a residential investment property to your SMSF?

Effective Tax Benefits

Holding a residential property investment in your SMSF is more tax effective compared to owning the property personally. The comparably favourable tax policy sround capital gains and rental income of a SMSF is one of the factors that have made holding residential property in your SMSF as a favourable option.

The maximum tax rate an SMSF can pay on a rental income is about 15% and it drops to 0% if the SMSF is in the pension phase. The capital gains, if the property is held in the SMSF for more than a year, can be as low as 10% to 0% depending on the phase of the SMSF. Considering all the parameters, holding a property in your SMSF can save you as much as 46% in tax.

A Strong and Stable Market

The residential property market is one of the strongest markets inAustralia. In Australia residential property values have grown at an average rate of 9% every year since March 2002. Several other factors such as the demand for housing and low rental vacancy rates are indicators of a stable residential property market in the country. Also, property investment has a long term attribute that perfectly suits the nature of super funds unlike the shaky and volatile shares

Balancing Your Portfolio

The residential property market is not as volatile as the stock market. The impact of economic factors on the residential property market is very different compared to the the impact on the stock market. The residential property market does not fluctuate as much as equities. This makes it a safer haven for investors and helps them balance their portfolios.

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