05 June 2015 Investing in property with SMSF

A self-managed super fund (SMSF) lets you control how you choose your assets, tax strategies and retirement planning. With an SMSF, it’s all up to you – you’re in the driver’s seat.

A SMSF is the ‘do it yourself’ version of compulsory superannuation. ‘It’s a superannuation fund of one-to-four members, with each member acting as trustee and being responsible for running the fund, investing assets, paying benefits, and meeting compliance requirements,’ writes Bernard Marin in Smart Property Investment.  

SMSF can bring many benefits to trustees:

  • Superannuation attracts 15 per cent tax, which is one of the lowest tax rates in Australia.
  • Trustees can choose the best service provider at the best price for the SMSF.
  • The trustees of the SMSF have absolute choice over the fund’s investment, opening up different investment options, including property.

The benefits of a DHA property through SMSF

Recently introduced rules allow SMSF trustees to borrow to invest, particularly in property. Now, via a ‘limited recourse borrowing arrangement’, SMSF trustees can borrow to fund the acquisition of residential property, provided that they and their relatives don’t use or live in the residential property owned by the SMSF.

Saul Eslake from Bank of America Merrill Lynch recently said that Australian real estate prices remain elevated because of “higher incomes, larger houses, a shortage of dwellings and a tax system that encourages investment in property.”  So, now is the opportune time for SMSF trustees to invest in residential property.

Why should SMSF trustees consider investing in a property through DHA?

For SMSF trustees searching for a solid income stream in property investment, Defence Housing Australia (DHA) is an ideal option. DHA provides housing to members of the Australian Defence Force and their families while selling and leasing back properties directly from investors to supplement its housing portfolio. The Federal Government’s recent announcement to scrap the privatisation of DHA has coincided with an opportune time for those looking to invest in the property market in Australia. DHA’s investment product has always been considered low-risk and because it’s backed by the Australian Government, it's secure.

With a DHA investment property, you receive a guaranteed rental income*. Rent is accrued daily and it is paid monthly in advance, directly into your bank account and is even paid if your property isn’t occupied.

Long-term leases – up to 12 years – are offered by DHA without the headaches normally associated with rental properties. DHA Property Care Program ensures that your property is managed and maintained to a high standard, in line with its contractual obligations with the Department of Defence.

Best of all, DHA arranges a licensed independent valuer to annually review your property’s market rent and adjusts it accordingly. This security of income makes Defence Housing particularly attractive to those operating a SMSF. You don’t have to be concerned about topping up or paying for repairs.

DHA’s management fee is calculated as a percentage of the rent and is taken from your monthly payments. It varies depending on your property type – freestanding houses are charged a flat fee of 16.5 per cent (including GST). For properties where a Body Corporate is responsible for some items, DHA charges 13 per cent (including GST). 

When the lease agreement comes to an end, DHA ensures that your property is returned in good order, is professionally cleaned, and the grounds and landscaping are in a neat and tidy condition.

DHA provides Australian SMSF investors with a property management service that is not only competitively priced in the market, but also offers investors something that money cannot buy; a secure future.

Learn more about investing with Defence Housing Australia or enquire online.


Disclaimers:* Rent may be subject to abatement in limited circumstances.

Investment is subject to DHA’s lease terms and conditions of sale. All references to the lease are in accordance with DHA Lease Agreement Edition 6B. Investors retain some responsibilities and risks, including property market fluctuations. Prospective investors should seek independent advice. The advice contained in this article is for general information only and should not be taken as financial advice.