Lenders will also require evidence of contributions into the fund to finance any property purchase within your Super. But it’s a bit more complicated than that.
How did this all come about?
Well, towards the end of the last decade the Banks in Australia lobbied the federal government to change the rules and allow residential investment directly for SMSF’s. Banks love to sell money and wanted to tap into the large and ever growing SMSF market.
The Banks were able to create another market to sell money (much to the delight of banking executives and bank shareholders). It was a great way to keep those lovely fully franked dividends flowing twice a year to the shareholders and bonuses to the executives.
At 30 June 2016, SMSFs held total borrowings of $19.5 billon representing 3% of total SMSF assets. The average amount borrowed increased from $356,000 in 2012 to $372,000 in 2016.
Property Spruikers, claiming to be ‘wealth advisers’ selling off the property developments also benefited from this change in legislation.
Fearing they would miss out, several SMSF trustees ploughed a substantial amount of their Superannuation assets into the one asset class; residential property, lured by the promise of high returns of capital growth and good income.
If you are considering buying property through super, you need to get the right advice from someone who is on YOUR side. It’s not a simple undertaking and mistakes can be costly and complicated.