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Using a DIY superannuation fund to buy property

Recent changes to superannuation tax laws means that Australians with DIY super funds can now borrow to buy property.


Recent changes to superannuation tax laws means that Australians with DIY super funds can now borrow to buy property.

With recent volatility in financial markets both here and abroad, this approach to investment is being taken by an increasing number of Australians seeking to diversify their investments.

A DIY super fund can be used to purchase residential, commercial, retail, and holiday units – subject to the property being acceptable to the lending institution.

Under this approach to property investment, the owner of the property is the DIY super fund. While  there is a mortgage associated with the property, the legal owner of the property must be a special trust entity.

The DIY fund makes all the necessary payments – taxes, home loan repayments, lenders' fees, repairs and maintenance costs, insurance and receives rent and other income.

People considering this approach to property investment also need to factor in associated costs, including set-up fees, legal and accounting fees and ongoing management expenses.

Most home loan lenders will also require that people considering this approach have met with a financial planner to carefully weigh up whether this type of property investment is suitable for their financial and lifestyle needs.

Potential benefits:

  • The investor selects the property
  • Another option for people seeking to create wealth
  • Many people are quite familiar with and therefore comfortable with investment property
  • Potential to offset rental income and other costs
  • Investors' other assets can be protected from borrowing risk* (advice required)

Potential challenges:

  • Complex transaction – requires consultation with accountant, solicitor and financial adviser
  • ‘Stricter than normal' lending criteria apply
  • Borrowing increases the potential for bigger losses from an investment (do your research!)

Are you thinking of using a DIY super fund to purchase an investment property?

Posted in: Archive

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