Why you might leverage your super fund to acquire your own assets

Wealth isn’t just about accumulation—it’s about making your resources work smarter for you, sometimes in unexpected ways.

While not a common practice, there may be circumstances where you might leverage your self-managed super fund (SMSF) to acquire your own assets and free up cash. This approach isn’t for everyone but can be beneficial in specific scenarios.

At First Financial, we have extensive experience working with clients who have SMSFs and understand that managing them and developing optimal strategies to achieve financial goals can be challenging.

One common question we address is about acquiring assets through superannuation—here’s an overview of how it works and when it might be beneficial.

Unlike a retail or industry super fund, an SMSF is a private superannuation fund that you manage yourself with full control over investment decisions. This offers exceptional flexibility to tailor a retirement strategy that aligns with your financial goals and preferences. However, with this control comes significant responsibilities.

SMSFs are regulated by the Australian Taxation Office (ATO) and must comply with strict rules to maintain their tax-advantaged status. Trustees are required to manage contributions, investments and compliance to ensure the fund operates solely for the purpose of providing retirement benefits to its members.

While the freedom to choose investments like shares, property and cash is appealing, SMSFs require time, knowledge and ongoing management.

For those who lack the expertise or availability, seeking professional advice is crucial to making the most of this powerful financial tool.

With an SMSF, you can purchase specific assets, such as ASX-listed shares or commercial property, directly from yourself. The SMSF pays for the asset using its cash reserves, and the asset then becomes part of the fund’s portfolio. All of these transaction types must adhere to strict legal and tax requirements to avoid penalties and maintain the fund’s compliance with superannuation rules.

This feature is unique to SMSFs and isn’t available to those with retail or industry funds, which pool contributions from many members and make investment decisions on behalf of all members collectively. These funds are managed by professional entities, which prevents members from transferring personal assets directly into the fund.

For example, we recently had a client who owned a commercial property and chose to sell it to their SMSF. The SMSF paid for the property using its cash reserves, and ownership was transferred into the fund. The client was then able to use the cash proceeds they received from the SMSF to pay off personal debt, which improved their cash flow while technically retaining the asset.

Leveraging your super to acquire assets can be effective in specific scenarios.

For example, it may allow you to retain unique or sentimental assets, such as commercial property or valuable shares, while freeing up cash personally to meet other financial goals. This approach can also help reduce high-interest debt and improve your overall financial position.

Tax efficiency is another advantage of holding assets within an SMSF. Earnings within superannuation are typically taxed at a lower rate than personal income, which can make transferring income-generating assets into an SMSF a smart long-term strategy. However, this benefit relies on the asset’s suitability and compliance with the rules.

This strategy is not without risks. SMSFs require ongoing management costs, and non-compliance with strict regulatory requirements can result in significant penalties. Also, the addition of large assets to an SMSF may reduce the fund’s liquidity or diversification, potentially exposing it to higher financial risk. For these reasons, we always recommend seeking professional advice before proceeding with any strategy involving assets within your SMSF portfolio.

Using your SMSF to acquire assets comes with important tax and compliance factors. For example, selling an asset like a commercial property to your SMSF may trigger capital gains tax (CGT) for you personally, if the asset has increased in value.

However, any income the asset generates within the SMSF is taxed at concessional rates, which may make it a more efficient option over time.

Having an SMSF opens the door to unique opportunities for building wealth and achieving financial goals. While leveraging your super to acquire assets isn’t a common strategy, it can be a practical solution in specific circumstances, offering a balance between immediate financial needs and long-term planning.

At First Financial, our team of SMSF experts is here to help you make informed, strategic investment decisions, with the entire process managed seamlessly in-house.

To learn more about our SMSF management services, contact us to speak with a friendly member of our team today.

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