How SMSF Property Investment Is Taxed

Property is an popular investment because it generates income and also, if you invest wisely, a capital gain as the property increase in value over the years. Purchase investment property through SMSF gives you access to significant tax concessions on rental income and capital gains on the profit when investment sold.

SMSF income taxed depends on at what stage the fund is in. If the fund is in its accumulation stage, then all income earned by the SMSF, is taxed at the concessional rate of 15% per cent, if the fund complies with super legislation.

When members start to draw on their SMSF for an income in retirement, the fund’s earnings are not taxed at all, if the members are aged 60 or more, and retired, they pay no tax on money they receive from the fund.

If the fund is transitioning from the accumulation to the retirement stage, and a transition to retirement income stream (TRIS) is being paid to members aged over preservation age, the part of the SMSF’s income will still be taxed at 15 per cent.

Income maybe offset by allowable deductions for any expenses incurred in earning this income in your SMSF.

If property owners invest for longer than 12 months and so they will qualify for the CGT discount. An individual is entitled to a discount on 50 per cent of the realized gain from the sale of an investment property. Where a property is owned by SMSF, if one or more members are not in pension stage or income stream, profit will qualify for a 33.3 per cent CGT discount.

Buying property personally entitles to an 50 per cent discount of gain, you pay marginal tax on the other 50 per cent, it could be up to 46.50 per cent including the Medicare levy, while SMSF will only have to pay 15 per cent on two-thirds of the profit.

Where members are over 60 and retired in the pension stage, SMSF could be paid zero tax, depending on SMSF on the stage of the fund is in.


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