Young investors suited to property borrowing

A new breed of younger self managed super fund (SMSF) trustees with higher super balances will increasingly take up the option of borrowing to invest in property, according to Multiport technical services director Philip La Greca.

With super balances increasing more quickly for those who have spent their whole careers working with a 9 per cent superannuation guarantee, young people and couples in particular may find it useful to pool their superannuation in the form of an SMSF to purchase an investment property that may otherwise be financially out of reach, he said.

Borrowing to invest in property within a SMSF is particularly appealing for those who already have a large portion of the investment price, because a heavily geared investment property negates some of the tax benefits associated with the strategy, he said.

Property gearing in SMSFs will also become more popular with small business owners moving their business premises into the SMSF, according to La Greca.

This is because when the business owner is looking to retire and sell the business, they have the option of selling the business and premises together, or retaining the premises within super and just selling the business, which can then pay rent back into the SMSF, he said.