Using your SMSF for Renovations

by reno on September 14, 2011

Earlier this week I received an email regarding the renovation of property using funds in a self-managed super fund (SMSF).

Previously you could buy investment properties with your SMSF, but you could not renovate them for some strange reason.

Here’s the email I received:

A draft ruling by the Australian Taxation Office has given self-managed superannuation fund members the ability to use money from inside their fund to renovate their property.

Previously, the ATO said SMSFs could not use money from any source to improve property, however, under the draft ruling you can potentially renovate to improve the value of the property.

The draft ruling will ultimately make real estate a more attractive option to the $420 billion SMSF sector.

We have been in support of this outcome since the 7th July 2010 when the remodelled legislation was delivered. It is an absolutely positive move, the drafted legislation clarifies some nuances of error in the original legislation.

The ATO understands that the future buoyancy of the property market will be heavily dependent on SMSFs’ investing in property as well as providing rental occupancies for younger people.

But while SMSF trustees will be able to renovate using money within their funds, borrowing to renovate will remain prohibited, the prohibition of borrowing to renovate property held in a SMSF is still difficult to understand.

The fact that you can now renovate, with non-borrowed money, is very good.

With the ability to manufacture capital growth through renovation is a big drawcard for property investors, the same capacity should also be available through SMSFs.

No doubt this change will make property investment using SMSFs much more attractive, especially for those who think they can add decent value through their renovations.

If you want to know more I recommend you go straight to the source of the email: Premium Property Finders.

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