Off-the-plan Property
Off-the-plan properties are purchased before construction is complete, often at a fixed price. This strategy can offer potential capital growth by the time the property is completed.
Benefits of Buying Off-the-Plan Through an SMSF
Capital Growth Potential: Lock in prices early and benefit from market appreciation.
Tax Advantages: Rental income is taxed at 15%, and capital gains may be discounted if held for over 12 months.
Diversification: Adds property to your SMSF’s investment mix.
Risks and Considerations
Valuation Risks: Final valuations may be lower than expected, requiring additional funds.
Liquidity Constraints: SMSFs must have sufficient liquidity to cover unexpected costs.
Construction Delays: Delays can impact investment timelines and returns.
Compliance Requirements for SMSF
Sole Purpose Test: Property must solely provide retirement benefits to members.
Related Party Restrictions: Cannot be acquired from or rented to related parties.
Borrowing Rules: Must use a Limited Recourse Borrowing Arrangement (LRBA) with a bare trust in place before purchase.
Steps to Purchase Off-the-Plan Property in Your SMSF
Review Investment Strategy: Ensure the SMSF’s investment strategy allows for property investment.
Establish a Bare Trust: Set up a trust to hold the property title on behalf of the SMSF.
Obtain Loan Pre-Approval: Secure financing through an LRBA.
Conduct Due Diligence: Research the developer and property market.
Sign Contracts Correctly: Contracts should be in the name of the bare trustee.
How SMSF Depot Can Assist
At SMSF Depot, we specialize in guiding clients through the complexities of SMSF property investments. Our services include:
Setting up compliant SMSF structures.
Establishing bare trusts and LRBAs.
Providing ongoing compliance and administrative support.