Do understand the tax treatment of SMSF property

Rents are concessionally-taxed at 15% while capital gains are taxed at an effective 10% during your fund’s accumulation or saving phase if the property is held for more than 12 months.

And once the property is backing the payment of a superannuation pension, fund income and capital gains are tax-free under current law.

This means that your SMSF may eventually be able to sell a property in the pension phase without paying any CGT on the profits.

The Labor Government had proposed to tax annual earnings of more than $100,000 from superannuation assets supporting a pension.

However, the legislation wasn’t passed before federal Parliament went into its pre-election recess.

SMSFs in the accumulation phase are entitled to claim the same types of tax deductions as individual investors who buy properties in their own names.

For instance, an SMSF can claim deductions for loan interest, repairs and depreciation, and for any shortfall between the deductible expenses and the rent.

But it is crucial not to overrate the benefits of negative gearing through an SMSF.