Your superannuation savings are designed to be long-term savings, essentially held in trust for you when you arrive at your preservation age and start your retirement phase. However, many Aussies question whether they can use their super to buy a house.
In this article, we discuss how you may be able to use your superannuation towards housing-related purposes for a place in Queensland; keep reading to find out more.
How can I access my retirement savings to buy a home?
Unfortunately, generally speaking, a super member can’t simply access their entire super balance to purchase a home. However, there are several ways that you may be able to utilise your superannuation account to enter the property market or purchase an investment property.
First Home Super Saver Scheme (FHSS) used for a house deposit
The FHSS scheme allows eligible individuals to save money for their first home inside their super account. If eligible, the FHSS works by making voluntary contributions to your super, which can then be withdrawn, along with associated earnings, to help buy your first home. There are limits on the amount you can withdraw to buy property. Typically, the FHSS is used to save towards a home deposit. You must also meet other conditions, such as living in the property for a certain period.
According to the Australian Taxation Office (ATO), you can apply to include up to $15,000 of your voluntary contributions from any one financial year in your eligible contributions to be released under the FHSS scheme, up to $50,000 across all years.
What are voluntary contributions?
Typically, the most common ways that people make voluntary contributions into their super fund are either through salary sacrifice contributions or after-tax contributions, known as ‘non-concessional contributions’ from your take-home pay or from their employer, if their employer has the facility to do so.
Your employer also may not offer the ability to salary package or salary sacrifice, however, if they do, this may offer you the ability to direct pre-tax money to your super fund to save for your house deposit. (Salary sacrifice is also commonly used as a strategy to reduce taxable income, so be sure to speak to a financial adviser or accountant before deciding what is right for you). Regardless of which option you choose, it’s important to discuss your plans with a qualified financial planner to assess whether it is in your best interest to do so, and identify any flow-on consequences that may not be immediately apparent to you.
Through a self-managed super fund
If it’s an investment property that you’re looking to purchase, then you may be able to purchase a residential property or commercial property through your self-managed super fund. Purchasing direct investments in the real estate market isn’t available in standard, APRA-regulated funds, however, it is one of the standout features of an SMSF.
Unless you (and/or the other fund members) have a significant SMSF balance, it’s likely that your fund would need to use a home loan to purchase an investment property, and there are some very strict borrowing conditions when purchasing property within super. For example, SMSF property loans are only available under a limited recourse borrowing arrangement (LRBA).
Why can I only buy an investment property with an SMSF and not a family home?
The sole purpose test is designed to ensure that a member’s superannuation savings are for the sole purpose of providing retirement benefits (or benefits to the dependants in the event the member passes away before retirement). Due to the sole purpose test, SMSFs are unable to purchase residential property and reside in it themselves. With the current economic climate making it more challenging for first-home buyers to enter the housing market, it’s understandable that many people are looking to use their super to own their own home, however, with an SMSF, property purchases are strictly for investment purposes only.
Accessing an SMSF property loan for a QLD purchase
At SMSF Loan Experts, we help hundreds of Australian SMSF owners, members and trustees to source the right SMSF property loan for their SMSF property investment objectives, regardless of where they intend to buy.
Contact the team today to discuss how we may be able to help your fund set up the right structure to add a QLD property to your SMSF investment portfolio.