Using your super to purchase properties has become an increasingly popular way of acquiring investment property. This is done by setting up a self managed super fund, an SMSF, which can then borrow funds to purchase an investment property. There are significant advantages to purchasing property in a self-managed super fund, including tax advantages. Your super fund may be taxed at a lower rate and capital gains may be discounted.
Currently, the income of compliant SMSFs is usually taxed at a concessional rate of 15%, which is usually considerably lower than most people’s income tax rate. This could mean that if the property is sold during the accumulation phase, it may be subject to a capital gains discount. Or, if the property is sold during the pension phase, it could be tax-free.