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SMSF Property Investment and Luxury Homes

By Rebecca Zhang

Recently, there are questions being raised about the use of self-managed super funds (SMSF) to purchase a property.  On the one hand, Melbourne is witnessing a large number of apartment buildings being constructed, and on the other, Sydney is the place to be if you have a luxurious house to sell to an enthusiastic buyer.

Property Investment with SMSF

There has been a huge increase in the number of SMSF property investors since 2006 when legislation allowed SMSFs to be used to borrow funds for investment purposes. The Australian Taxation Office’s (ATO) data indicates that $20.5 billion worth of residential and $68 billion of commercial properties are now held by SMSFs.

Some investors have found they can lend money to their SMSFs at low interest rates or even zero interest, avoiding contribution limits and remaining on a low tax rate. Rental income for wealthy investors who have used this system can then be taxed at up to 15% instead of the 46.5% top personal rate that they might normally have to face.

The ATO’s advisers recently communicated their disapproval of the strategy and indicated that taxpayers would not receive favourable rulings about the matter in the future, although cases would still be treated individually.

Luxury homes commanding extraordinary prices

Australia’s rising share prices and low interest rates combined with increased demand from foreign buyers have led to an increase in luxury property sales. These lavish homes are not only being placed on the market, but are also selling for more than $10 million each.

The latest sale was a mansion in Sydney with views of the Harbour Bridge and the Opera House. It passed the $30 million mark. During the global financial crisis, the house was on the market for three years. However, it seems that now is the right time for luxury home vendors to take full advantage of the current real estate market.

Despite the fact that most people don’t own one of the most expensive houses in the country, many people are considering placing their home on the market as demand for housing continues through the winter.

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