"Can I withdraw my superannuation after turning 60 to invest in property?"
- Question from Ken in Brisbane.
Top answer provided by:
Michael Coorey
The short answer is “Yes”, provided you have met a “Condition of Release”. Assuming you satisfy one of the stated conditions, you may withdraw some or all of your accumulated super balance and use the proceeds to invest in property.
However, there is another option you may wish to consider, and that is retaining their funds in the superannuation environment and establishing a Self-Managed Superannuation Fund (SMSF) to make your property investment. This has the advantage of retaining your investment in a tax-efficient environment (you can transfer up to $1.7m from your superannuation account into the pension phase – this is known as your Transfer Balance Cap. This is particularly relevant and beneficial when you commence a retirement income stream, where the assets in your funds and the income stream will be tax-free!
Making the decision to establish an SMSF should not be taken lightly, as the responsibilities are many and can be quite onerous, with significant penalties that can be applied if the Superannuation Industry (Supervision) Act is breached. If you desire to use the property for your personal use, this will not be permissible as you will be in breach of the “Sole Purpose Test”. Your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependants if a member dies before retirement.
If your super balance is insufficient to purchase a property outright, you are able to borrow additional funds using a “Limited Recourse Borrowing Arrangement”
Whichever alternative you wish to explore, it would be wise to seek professional advice which takes into account your personal circumstances, financial and lifestyle goals. For example, if you do not intend to purchase the property for personal use and intend to rely on the rent to fund your retirement, it may not be wise to do so unless you have sufficient cash holdings, and/or additional sources of income from other assets, such as shares. If the rent is your only source, and your property is not able to be rented for a significant period of time, your retirement lifestyle may suffer. This situation is made even worse if you hold the property in an SMSF, as it may not be able to meet its obligation to pay your retirement income stream and be deemed insolvent, hence, breeching the SIS Act.
Another point to consider is whether you are willing to deal with the ongoing maintenance and potential of encountering ‘bad’ tenants that go with owning a rental property, for example. These risks can be costly, both, from financial and personal stress perspectives and should be factored into your decision.
With sound advice, you will be in a position to weigh up the pros and cons of your decision to cash in your super fund and purchase an investment property. Heading into retirement is a significant financial and lifestyle decision and entering it with the “peace of mind” of knowing that you have explored alternative options is a wise thing to do!
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
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