self-managed super funds now allowed to renovate investment properties
Property investors are now allowed to renovate there properties in their self-managed superannuation funds.
The ATO (Australian Tax Office) has scraped the ruling that prevented the usage of money had been loaned to buy an investment property.
Self-managed superannuation owners have always been permitted to maintain their investment properties, but they were forbidden from changing/renovating them because it would cancel out the idea of the “single acquirable asset” of the term the A.T.O. had come up with, to classify SMSF assets more distinctly.
This can turn around situations where property investors had lost there appetite to use their SMSF and use mortgages to acquire real estate.
The past rules meant, for example, that “if a SMSF had used a mortgage to acquire real estate in QLD that was annihilated in the past floods, the insurance money owed could only be used to pay off debt rather than repair and rebuild.
In that illustration, the property investor would be left behind with just a block of land that they would be forced to sell, because any rebuilding or renovating, even if it was the same one, would be classified as a new asset.
The new decision still requests that the renovation is paid for by cash already inside the SMSF apposed to borrowing.
The new ruling will not, nonetheless, allow SMSF property investors to purchase and demolish buildings and develop units using financing, for example.
Allowable alterations include pools, extensions (an extra room) and larger kitchens, but they must not “radically change” the property.
It also gives self-managed superannuation owners more space to move when acquiring a renovation type property that needs more than just maintenance, even though, again, the new work cannot be financed by a mortgage.
The ruling caps a succession of policies and procedures that used to permit borrowing to buy investment property in SMSF funds until June 1999, which was then forbidden to except for existing set ups until September 2007. The ATO brought in the no-improvements/renovations rule in 2010.
About Jhai Mitchell
Jhai is an award winning Internet Marketing Real Estate Agent for Elders Toongabbie and Kings Langley. After running his own internet marketing business he has now set his own sites for the real estate industry. He observed that 90% of real estate agents did not know how to market themselves online. Jhai is now fixed on one goal. To teach real estate agents that they can market online so much better than they currently are.
Since then he has been consistently quoted in the Sydney Morning Herald and Real Estate Business online. He is a regular guest blogger on TheHomePage.com.au, sharing his expertise of marketing aspects for the Real Estate Industry. His biggest passions are his wife, martial arts, dogs and most of all property.