Today we’re diving into part three of our series on the six reasons people invest in property through their superannuation (SMSF). The third reason, and today’s topic, is all about tax-effective retirement income strategies.
When it comes to retirement income and self-managed super funds (SMSFs), the magic number is 0%. Yes, you heard that right—zero. Once your SMSF moves into the pension phase, you pay no tax on the income and gains generated within your super fund. This is a game-changer for your retirement planning.
A Closer Look at the Benefits
Firstly, imagine owning property assets within your SMSF that generate $100,000 worth of rental income annually. In the pension phase, you pay absolutely zero tax on that income. To put this into perspective, if you were earning $100,000 from your job or other sources outside of super, you’d be hit with a tax bill of approximately $22,967. That’s a substantial amount of money saved by utilising your SMSF.
Now, let’s talk about capital gains. If you bought a property in 2024 and held onto it until retirement, watching its value soar, you’d naturally be concerned about capital gains tax. Let’s say the property appreciated by $1 million, and you decide to sell it in the pension phase of your SMSF to cash in on that gain. Here’s the stunning part: you pay $0.00 in capital gains tax on that $1 million profit. That’s right—no tax whatsoever.
This tax efficiency is one of the most compelling reasons why so many people choose to invest in property through their SMSF. It’s a strategy that not only secures your financial future but also maximises your wealth by keeping more of your hard-earned money in your pocket.
Why Property Through Super?
By investing in property through a self-managed super fund, you take control of your retirement savings while enjoying significant tax benefits. It’s an approach that offers unparalleled peace of mind and financial security, ensuring you get the most out of your investments.
Finally, read more about SMSF tax rates on the Australian Taxation Office website. We hope this has given you a better understanding of the incredible tax advantages of investing in property through your SMSF. Next, we explore the fourth reason people opt for buying property through super: using employer contributions to pay off loans.
Information from Teach Me About Property is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS) or other offer document prior to making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).
