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C&G’s Guide: Using your Super to Buy Property
The property market plays an impactful role in Australia’s economy, and many people consider acquiring real estate when planning their investment or retirement strategy. In this C&G blog, we broadly discuss how you can use superannuation to purchase property.
Consider the pros and cons.
Superannuation is intended to financially support you through retirement, and accessing it earlier is a decision not to be taken lightly. That’s why there are so many rules surrounding early withdrawal, which is more usually granted in cases of severe financial hardship or on compassionate grounds.
It is not unusual for people to access their super early to buy property, however. People choose to use their super in this way for a variety of reasons, whether due to positive experiences in property investment or a desire to retire with a full-paid-off asset under their belt. Superannuation use has the potential of eradicating the need to pay Lenders Mortgage Insurance, and offers the possibility of securing a better rate on your home loan.
On the other hand, it’s also important to consider the risks associated with this superannuation strategy. The biggest risk to weigh is how much money you’ll need to have on-hand when you do decide to retire. It’s hard to gaze into the future, and best to consult with a financial planner who will take time to understand your goals and circumstances before making a recommendation.
First Home Super Saver Scheme
The first home super saver (FHSS) scheme allows first home buyers to save within their super fund to buy their first property. This was introduced in the 2017-18 Federal Budget to tackle housing affordability, with some important changes finalised in 2019. Within the scheme you can make voluntary contributions to your super, from which you can withdraw up to $30,000 to help you purchase your home. You’ll also have to meet certain eligibility criteria, including residing in the home for at least 6 months.
Accessing super through a SMSF.
This investment strategy will require you to set up your own self-managed super fund (SMSF), allowing you to determine how and where your money is invested. This is a substantial financial decision that requires your understanding of both superannuation and tax laws. We recommend engaging a financial advisor to help you understand your obligations and set up your fund correctly. The Australian Taxation Office (ATO) also has plenty of useful resources to get you started.
Once you accumulate the appropriate balance in your super fund, you can use it as leverage to secure a loan for your investment property. However, it is worth noting the rules on using your SMSF, which restricts the way assets can be utilised.
Ready to take the next step? Chisholm and Gamon are all about helping Baysiders realise their real estate goals! If you are considering leveraging your superannuation, don’t hesitate to reach out to our friendly team for a great referral. We’d be happy to refer you to our extensive network of financial experts to help you make the best decision.