Use Your Super to Buy a Home

If you’re thinking it would be great to use your super to help put a roof over your head, there are only two ways to do this:

1. The First Home Super Saver Scheme (this is very limited but it’s better than nothing – simply Google it).

And;

2. Our tax practice has undertaken extensive technical analysis of the interaction between SMSF law and the concept of Business Real Property. This established that in carefully defined factual circumstances, certain arrangements involving a home-based business may be capable of satisfying the relevant superannuation and tax law requirements.

Depending on your situation, this may suit you as follows:

• You’re recovering from a financial calamity such as business failure or divorce and your super is your only significant deposit available.
• You’re a first home buyer and your super is your only significant deposit available.
• You wish to combine your super with other family members to assist you and or they to begin with home ownership.
• You wish to use the cash in your super to upgrade your home to something and somewhere you consider superior.
• You wish to use the cash in your super plus borrow even more (within super), to upgrade your home to something and somewhere you consider superior.

We are not suggesting however that any of the above reasons are good enough for you to even contemplate this. We are only saying that such reasons might get you want to start thinking harder about your options.

Self managed super funds are complex and highly regulated. You'd need to tick a lot of boxes to get it all right.

For some people it could be possible and worthwhile, For many though, it just won't.

Done right and under the right circumstances, here’s what you can expect:

• Your fund gets a full tax deduction for property expenses incurred such as mortgage interest and repairs etc.
• On an arms-length basis, your business will rent the property from your fund (you may find that attractive as the rent goes towards the mortgage which means you’re paying off your retirement asset and if there’s any left, it’s available for investing for your retirement).
• At least half the rent will be a tax deductible business expense (remember you’d be working at your rented home business property) and that’s either full-time or on the side of whatever else you do for a living! In our view, if at least half the rent is not deductible, you should not go down this path. 

We are not licensed to provide financial advice on this strategy however we can provide you with factual information and of course detailed taxation advice on the effects it creates for participants. If interested, please make contact and we'll share certain static information with you and then if you like, you can seek out a financial planner to provide you with a Statement of Advice thus allowing you to proceed with the relevant consumer protections in place. Once you have found your financial planner, we think it would be a good idea for you to tell us who that is so we may make every effort to assist them, to assist you.

 

 

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