SMSF investors can now gear into residential property

Everybody loves property. Many Australians trust residential property over shares as an asset class to deliver secure and reliable investment returns.

But until recently investment in property was out of reach for the over 380,000 self-managed superannuation funds (SMSFs) in Australia.

In September 2007 amendments made to legislation affecting superannuation allow SMSFs to borrow money to invest in Australian residential property.

The launch this month of a warrant loan offers a new funding solution for SMSFs that want to invest in residential property.

The warrant is being marketed by PowerSuper and backed by leading global bank, ING Direct.

PowerSuper is committed to only sourcing bank funding (as opposed to securitised debt funds) for the strategy.

The warrant, which is issued under an Australian Financial Services Licence, will only be made available to SMSFs through professional advisers such as accountants, financial planners, lawyers and other suitably qualified SMSF advisers.

The warrant ensures that SMSFs do not have to commit to the outright purchase of a property. SMSFs can purchase a property with a minimum deposit of 30%, with rental income and superannuation contributions servicing the financing costs.

Head of Distribution for PowerSuper Mr. Jo Parkinson said the warrant complies with all aspects of regulation and legislation.

“There are a number of DIY super fund structures and documentations that could potentially leave an investor at risk of an Australian Taxation Office audit. Last year there were almost 10,000 audits of DIY super funds. PowerSuper’s structure satisfies all the requirements of the tax authorities and other regulatory bodies.”