What you need to do now, to buy a property with confidence in your super fund
If you’ve been thinking of buying a commercial property in your super fund, but are unsure if you have enough money saved, you need to start planning now.
By not acting now, you may not have enough funds to contribute towards your next purchase, thereby delaying the opportunity if you miss these key strategies.
There are two key factors that affect your finance approval:
- Deposit – Do you have enough cash in superannuation?
- Can you afford it?
Deposit – Do you have enough cash in superannuation
With tax planning season fast approaching, it’s a key time to flag with your accountant and financial planner that you’re wanting to buy a commercial property next financial year. Why? If you don’t have sufficient funds now, your advisers can help you explore important strategies that will enable you to add more to your super fund in preparation for your significant purchase.
Below is a sample of what to budget for and how much cash is needed to fund the purchase.
*Assuming servicing is evident. For this example, we’ve assumed the property is based in metro Melbourne to determine stamp duty and assumed the purchase is a going concern.
Plan for GST
If the property is not being purchased as a going concern, you need to budget for a further 10% in your superannuation. The 10% is refunded after you’ve lodged your BAS, but you need to make sure the funds are inside super, which you may not have available. There are limited lenders that fund GST temporarily, meaning this will limit your lender options.
Learn More: How to Fund the GST on Your SMSF Property Purchase
Tip: You should also discuss with your financial planner, what your goal is for those funds once it’s refunded back to maximise your return.
Here are 3 ways to make large super contributions
It’s important to remember that your super contribution caps reset on 1st July.
If you don’t use this year’s caps before 30th June:
- You lose access to this year’s non-concessional cap (unless using bring-forward strategically)
- You may delay being able to build the deposit required
- The purchase may need to be postponed 12 months
For property deals, timing of contributions = timing of acquisition.
You want to purchase:
- Commercial property price: $1,000,000
- Required SMSF deposit (20% + costs): ~$280,000*
- Current super balance available: $150,000
- Shortfall: $130,000
You are under 75 and eligible for bring-forward.
Scenario 1 – Contribute Before 30 June
You contribute:
- $120,000 non-concessional (this year cap)
- Plus trigger bring-forward: another $240,000
Total possible injection = $360,000
Now your SMSF balance becomes:
$150,000 + $360,000 = $510,000
You can proceed immediately with the purchase.
Scenario 2 – You Miss 30 June
If you wait until July:
- You can contribute $360,000 under bring-forward in the new year
- BUT you cannot also use this year’s $120,000 cap separately
Effectively, you’ve delayed your ability to inject capital by 12 months.
That means:
- Property may be sold to someone else
- Market value could increase
- Rent and capital growth potentially lost for a full year
Scenario 3 – You take advantage of your concessional cap
If you also haven’t maximised concessional contributions:
- You could potentially add unused concessional contributions cap amounts from up to 5 previous years (if under $500k total super)
Missing 30 June may mean losing ability to reduce personal tax this year and for business owners in high-income years that tax advantage is significant.
You can learn more about concessional caps and non-concessional contribution cap and bring forward rule here:
Concessional contributions cap | Australian Taxation Office
Non-concessional contributions cap | Australian Taxation Office
Bonus tip:
If you’re a business owner, we can use your financials to improve your borrowing power. Typically, SMSF loans are assessed based on member contributions and rental income. However, if your business is going to be the tenant, then we can also take into consideration the strength of your financials.
This means you’ll have better purchasing power, but if your aim is to lower your tax burden, your loan amount could decrease as a result.
Before you start searching for a property, use our SMSF Loan Calculator to get an estimate of your fund’s purchasing power.
Stop Guessing, Start Planning
Thinking about buying property in your SMSF? Book a quick call to explore your borrowing options and understand more about personal guarantees.
Disclaimer: The information provided on this website is general in nature and has been prepared without taking into account your personal objectives, financial situation, or needs. Before acting on any information on this website, you should consider the appropriateness of the information having regard to your objectives, financial situation, and needs.