A Detailed Breakdown of Costs When Buying Property Through Your SMSF

When considering purchasing property through your Self-Managed Super Fund (SMSF), it’s essential to understand the various costs involved and how you can claim them in your SMSF tax returns. Below is a detailed breakdown of the upfront and ongoing costs you may encounter during the property investment process. Please note that this information is general in nature; for tailored advice, we recommend scheduling an appointment with your SMSF accountant.

Upfront Costs (Acquisition Costs)

These are the initial costs you will incur when purchasing property through your SMSF:

Stamp Duty
- What it is: A state-based tax on the transfer of property.
- Claimable: Yes, stamp duty is an expense you can claim in your SMSF tax returns as it’s considered part of the cost of acquiring the property.
Legal Fees
- What it is: Fees paid for legal services such as reviewing contracts or establishing a bare trust.
- Claimable: Yes, legal fees are part of the acquisition costs and can be claimed.
Broker Fees
- What it is: Fees paid to a mortgage broker for arranging finance for the property purchase.
- Claimable: Yes, broker fees are part of the borrowing costs and can be claimed.
Building and Pest Inspections
- What it is: Costs for professional inspections to assess the condition of the property before purchase.
- Claimable: Yes, these are claimable as they are directly related to acquiring the property.
Buyer's Agent Fees
- What it is: Fees for using a buyer's agent to help locate and negotiate the purchase of the property.
- Claimable: Yes, these fees can be claimed as part of the acquisition costs. The buyer’s agent plays a key role in ensuring the property aligns with your investment strategy and goals.
Loan Establishment Fees
- What it is: Fees charged by lenders when setting up a loan for the property purchase.
- Claimable: Yes, these fees can be claimed as part of borrowing costs.
Property Appraisal Costs
- What it is: Fees for professional property appraisals before purchase.
- Claimable: Yes, these costs are claimable if they’re directly related to making the purchase decision.
Trust Setup Fees
- What it is: Costs for setting up a bare trust structure (if needed for property investment via SMSF).
- Claimable: Yes, these fees can be claimed as part of setting up your SMSF for property investment.

Ongoing Costs (Holding and Maintenance Costs)

These are the ongoing expenses incurred while holding and managing the property:

Property Management Fees
- What it is: Fees for managing the property, including tenant sourcing, rent collection, and property upkeep.
- Claimable: Yes, these fees are claimable as they are necessary for managing the property.
Interest on Loans
- What it is: Interest paid on any loan used to purchase the property.
- Claimable: Yes, the interest is tax-deductible and can be claimed in your SMSF tax returns.
Council Rates and Utility Charges
- What it is: Ongoing charges for services like local government rates, water, and other utilities.
- Claimable: Yes, these costs are claimable as part of holding the property.
Insurance
- What it is: Property insurance costs, including building and contents insurance.
- Claimable: Yes, SMSFs can claim insurance premiums for the property.
Repairs and Maintenance
- What it is: Costs associated with maintaining the property, including plumbing, electrical repairs, etc.
- Claimable: Yes, these costs are tax-deductible and can be claimed.
Depreciation
- What it is: Depreciation on the property and its assets (e.g., furniture, appliances).
- Claimable: Yes, SMSFs can claim depreciation on eligible assets to reduce taxable income.
Accounting and Audit Fees
- What it is: Fees for preparing SMSF financial statements, tax returns, and audits.
- Claimable: Yes, these professional fees are claimable as part of the administrative costs of running your SMSF.
Trustee Fees
- What it is: Fees paid for the trustee’s management and governance duties.
- Claimable: Yes, these fees can be claimed as part of the SMSF’s ongoing management costs.
SMSF Administration Fees
- What it is: Fees paid to an SMSF administrator for services like bookkeeping and compliance.
- Claimable: Yes, these fees are claimable as part of the ongoing costs of running your SMSF.

Non-Claimable Costs:

While many costs can be claimed, there are some that are not deductible:

Personal Expenses: Any personal use of the property or related expenses (e.g., personal insurance) are not claimable.
Capital Improvements: Expenses related to major renovations or improvements (e.g., adding a swimming pool) are generally not deductible, although they may affect the property's cost base for capital gains tax when sold.

Conclusion

Understanding the costs involved in purchasing and managing property through your SMSF is crucial for maximising the tax advantages and ensuring the growth of your retirement savings. These upfront and ongoing costs can help reduce your taxable income, but it’s essential to stay compliant with SMSF regulations.

Ready to take the next step? ?

If you're excited about building your wealth through SMSF property investment and want a tailored strategy, I’m here to guide you every step of the way! Book a one-on-one Property Investment Initial Consultation with me today, and let’s discuss how we can make your SMSF property investment goals a reality.

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Please note: This is general information. To ensure you're claiming all eligible costs correctly and staying compliant, we highly recommend booking an appointment with your SMSF accountant.

A Detailed Breakdown of Costs When Buying Property Through Your SMSF

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