SMSF for property investment

Hi guys,

First time poster here asking for some advice.
I am a 25 year old medical student/soon to be physician with not much at all of a deposit due to study commitments since a teenager.
My parents have offered to use their superannuation in the form of a SMSF (hopefully under my name) to help purchase my first investment property. I was unsure however of the long term trajectory of such a move, i.e. whether I am able to be listed as a bare trustee and have actual ownership rights of the property which will allow me to access equity and purchase a second investment property as a seperate loan.

Appreciate any tips, thank you.

 

Suggest seeking accountants advice. It's your parents super fund, you cannot use it under your name. You cannot use equity from a super fund property for further purchases.

Have they considered parents going guarantor for your purchase and using their current PPOR or investment as a guarantee?

 

Hi thank you for your reply. My parent's unfortunately don't have property/investment under their name, they are currently renting.

 

And you want to risk their super?

 

Seek legal advice. It could be done but probably better not to.

 

I wouldn’t do it for a whole stack of reasons. Even more so, at 25.

 

Please correct me if I'm wrong, but I only see the risk as minor, considering the nature of the investment, and considering once they reach retirement age they can access the investment as their PPOR rather than me purchasing them a home later on. I will also be well within means to support them/pay back in future. I was just wondering if this method was a viable stepping stone to enter the property market sooner for younger investors. Cheers

 

Isn’t the property to be owned by your parents’ SMSF - if so, this can’t be done.

OR are your parents withdrawing the money from their SMSF ...

I am confused !!

 

My parents are not withdrawing money from their super as they have not reached retirement age of 65 and cannot do that I believe? Neither are they choosing the Transition to Retirement (TTR) drawdown option either if that is what you're referring to. They wish to change from regular super to a SMSF in order to purchase property but wish to include me as a trustee.

My understanding however is that the 'bare trust' has ownership rights to the property until the property is paid off - not the SMSF trustee. Does this mean when acquiring a 2nd property, that myself as a trustee can use any original equity (i.e. value of the total super, not 'equity growth' as I think that's inaccessible) to give me purchasing power.

Hope that is clearer. Thanks

 

Who told you this? Generally, one cannot use SMSF assets for personal use. How is it your investment if its owned by your parents SMSF?

You chose to study something that takes years to complete. Usually a stepping stone for young investors is to work early and save. On the other hand, you will probably have a good income. Do it on your own.

 

Not really. Did a lawyer or accountant knowledgeable about SMSFs say you can do all of this?

 

A SMSF cannot borrow to acquire an asset other than thru a limited recourse borrowing arrangement where the security property is held by a custodian trustee until the loan is paid off and mortgage discharged. A SMSF cannot mortgage it's property so you or a related SMSF or any entity will not be able to access the equity.

A member cannot live in a smsf owned property either. Even if they have met a condition of release. But your parents could purchase the property from the smsf

 

Okay. Thank you for the clarification - appreciate the passing down of knowledge!

 

Tell your parents thank you for their generous offer, but you'll save a deposit and do it by yourself

 

Assume the investment strategy within their Trust Deed permits there is nothing to stop them lending you funds inside their SMSF and you in turn use these funds to purchase a property in your name.

You would declare the loan as a liability when applying for an investment loan and their SMSF would Tax on the interest income.

Few areas of SISA you need to get around but nothing out of the ordinary.

 

The parents do not seem to have assets outside super. Unsecured loan from their only asset, the super fund, to the son to buy property, which will have a first mortgage. How is this in the best interests of the member?

 

Won't be able to loan it to a family member either. Based on my personal tax accounting days, it will be what is classed as an 'in house asset'.

In-house assets

 

Get some legal advice before trying this as the parents would be a related party

 

Doesnt your own link say in house assets are not prohibited but with limitations?

 

Max 5% of the fund.