It never ceases to amaze me how much people want to learn about building wealth using self managed superannuation funds (SMSF). Especially when they find out that they will not pay any tax when they sell any property in the fund.

So if you are a business owner a very attractive way to create wealth in your SMSF is through buying your business premises. That way you know the rent will be paid as you are both landlord and tenant.

In fact, even individuals who have just $100,000 can set up a self managed superannuation fund and use the equity in your home to buy an investment property in your SMSF name. You can become the bank.

How can this happen?

Your SMSF can borrow to purchase real property (can be from you, for example, your business premises), purchase other commercial, industrial property or residential property or buy listed shares & securities. Your SMSF funds the deposit, stamp duty and legal’s and borrows the balance to complete the purchase. A special trust known as a Security Trust purchases and owns the property and allows the lender to take a mortgage over the property to facilitate the loan for the Superfund. Your SMSF receives rent, pays interest & outgoings. If the rent doesn’t cover the outgoings your super contributions will cover any shortfall.

So why do it?

The asset is protected from your creditors as it is part of your SMSF. Superannuation contributions can be used to make principal & interest repayments on the loan and get a tax deduction for it. There is no Capital Gains Tax payable on the sale of the property when your SMSF is in pension phase.

Even if you sell before pension phase the CGT is only 10%. SMSF are a very attractive way to save tax and create wealth outside of the business and home.