Setting Up Your SMSF and Investing in Property with SMSF Wizard: A Complete Guide
More Australians are choosing to take control of their superannuation through Self-Managed Super Funds (SMSFs), enabling them to invest in a variety of assets, including property. SMSF Wizard makes the process of setting up an SMSF and purchasing property easy, managing all the details so you can focus on building your investment portfolio. This guide walks you through the process of getting started, rolling over your superannuation, and using your SMSF to invest in property.
Step 1: Deciding to Take Control of Your Superannuation
Deciding to manage your superannuation with an SMSF gives you the flexibility to invest in a broader range of assets, including property. Owning property through an SMSF can be an effective way to grow your wealth and secure long-term returns.
With SMSF Wizard, you have the freedom to decide how much of your superannuation you want to manage. You can even maintain both a traditional superannuation fund and an SMSF at the same time, which allows you to gradually transition into full control over your super.
Step 2: Setting Up Your SMSF with SMSF Wizard
Once you’ve made the decision to take control of your superannuation, SMSF Wizard will handle the setup of your SMSF, ensuring everything is done correctly and in compliance with Australian regulations. Here’s how we do it:
1. Trustee Setup
We will register a special-purpose company to act as the trustee for your SMSF. Every SMSF requires a trustee, and in this case, the company acts as the legal entity that will hold the SMSF’s assets, including property.
2. Document Drafting
SMSF Wizard drafts all the legal documents required to establish your SMSF, including the trust deed and other necessary compliance documents.
3. Applying for TFN and ABN
SMSF Wizard will apply for a Tax File Number (TFN) and an Australian Business Number (ABN) for your SMSF. These are typically issued instantly, allowing your SMSF to legally operate.
4. Obtaining Compliance Status
We also apply for the compliance status of your SMSF with the Australian Tax Office (ATO). This process usually takes around two weeks, at which point your SMSF will be officially recognized as a complying fund.
Step 3: Rolling Over Your Superannuation and Setting Up Accounts
Once your SMSF has its TFN, ABN, and compliance status, it’s time to roll over your existing superannuation and set up the necessary accounts to start investing in property.
1. Setting Up a Bank Account
SMSF Wizard will assist in setting up a dedicated bank account for your SMSF. This account will hold your super contributions and be used for purchasing property and handling ongoing expenses.
2. Rolling Over Existing Superannuation
After the bank account is established, we will help you contact your existing superannuation fund to roll over your super into your SMSF. This ensures that your funds are available to invest in property.
Step 4: Purchasing Property with Your SMSF
Once your SMSF is fully operational, it’s time to purchase property. SMSF Wizard will guide you through this process, ensuring that all transactions comply with SMSF rules and regulations.
1. Setting Up a Bare Trust
If you plan to borrow money to purchase property, SMSF Wizard will establish a bare trust. The bare trust is required when an SMSF borrows to acquire property, as the property must be held in trust until the loan is fully repaid. This structure ensures that your SMSF remains compliant with Australian regulations regarding limited recourse borrowing arrangements (LRBAs).
2. Purchasing in the Name of the Bare Trust
The property is purchased in the name of the bare trust, but all benefits, such as rental income and capital growth, flow to your SMSF. Once the loan is repaid, the legal title of the property is transferred to the SMSF.
3. Complying with Loan and Property Investment Rules
If borrowing to purchase the property, SMSFs can only use limited recourse borrowing arrangements (LRBAs). This means the lender’s claim is limited to the property being purchased, and other SMSF assets are protected. SMSF Wizard ensures that all loan and property purchase transactions are set up correctly.
Step 5: Managing Your Property and Growing Your SMSF
After your SMSF has successfully purchased property, you can start growing your retirement savings through rental income and long-term property appreciation. Additionally, you can arrange for your employer to contribute directly into your SMSF, helping to grow your superannuation and fund ongoing property-related costs.
Important Property Investment Rules for SMSFs:
– Sole Purpose Test: Just like any other SMSF investment, purchasing property through an SMSF must satisfy the Sole Purpose Test. This means the primary objective of the SMSF must be to provide retirement benefits for its members. You cannot live in or rent the property to a relative or use it for personal purposes before retirement. Every investment decision should meet the requirement of being solely for providing retirement benefits to the fund’s members.
– Investing in the Name of the SMSF: Any property purchase must be made in the name of the SMSF or the bare trust (if applicable). This ensures that the asset is legally owned by the SMSF and complies with ATO regulations.
– Limited Recourse Borrowing Arrangements (LRBAs): If your SMSF is borrowing to purchase property, it must be done under an LRBA. This ensures that the lender’s recourse is limited to the property itself, protecting the rest of your SMSF’s assets.
– Complying with ATO Guidelines: SMSF Wizard ensures that all transactions and property investments comply with ATO regulations and guidelines, ensuring that your SMSF remains compliant at all times.
Why Choose SMSF Wizard?
SMSF Wizard provides an end-to-end solution for setting up an SMSF and investing in property. We handle the entire process, from setting up your SMSF to creating the necessary trust structures and managing the property purchase. You only need to provide some basic information and sign the required documents, and we take care of the rest.
Fast Turnaround
The process from start to finish, including the setup of your SMSF, applying for compliance status, and rolling over your superannuation, typically takes around four weeks. Once that’s complete, you’re ready to purchase property through your SMSF.
Hassle-Free Process
We take care of all the legal, administrative, and compliance tasks, so you don’t have to worry about navigating complex regulations or documentation.
Expert Guidance
SMSF Wizard’s team of experts ensures that every step of the process is managed in accordance with the latest SMSF and ATO rules. We ensure compliance and set you up for success with your property investment.
Setting up an SMSF and purchasing property is a powerful way to take control of your superannuation and build long-term wealth. With SMSF Wizard, the process is simple, compliant, and hassle-free. From creating your SMSF to purchasing property through a bare trust, SMSF Wizard provides everything you need to invest in property with confidence.
Let us take care of the hard work so you can focus on growing your wealth and securing your financial future.