SMSF residential borrowing banned as property investors pivot to commercial real estate

Commercial properties can often yield a high cash flow. Recent rule changes mean residential property is now off the cards for many people trying to buy property through a Self Managed Super Fund (SMSF). SMSFs are no longer allowed to enter new Limited Recourse Borrowing Arrangements (LRBAs) to buy residential properties as of August 10, with existing arrangements entered into before this date grandfathered and still able to be refinanced. The new rules still allow for residential property to be purchased outright (without borrowing) through a SMSF. They also allow for borrowing within a SMSF in order to buy commercial properties. So, with lending now restricted in the SMSF space, what are the benefits and drawbacks of investing in property through self-managed super – and is it still worth it? Warehouses can be popular in certain locations. TAX BENEFITS While investors can no longer leverage residential property through their SMSF, all the same tax advantages remain for those borrowing to invest in commercial property, says owner and director of Palise Property Steve Palise. One major advantage is tax-free income at retirement, he says. MORE: Sydney investor snaps up three houses ...