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Renovating a property owned by your SMSF

While an SMSF may borrow money to purchase a property using a limited recourse borrowing agreement (LRBA), there are strict regulations surrounding the use of borrowed funds to renovate and improve properties. While you may be able to purchase an older property and renovate it using borrowed money, you are restricted from ‘improving’ the property, for example by building an additional storey or adding a swimming pool. If you are unsure as to whether the changes you have planned would be considered an ‘improvement’, it is advisable to seek the advice of the ATO.

You are, however, permitted to improve a property using funds from other sources, typically the accumulated contributions to the fund. For this reason, if making improvements to the property is central to your investment strategy, you need to ensure that your fund has sufficient cash flow to see these changes through.

Here are some other tips for renovating a property owned by your SMSF:

-All of the materials must be purchased in the SMSF name, even if you are carrying out the renovations yourself

-You may not be paid for any work you complete unless you are a professional tradesman who offers the same services to the public

-you may not live in the property at any stage, even if you are renovating it yourself

Posted on 25 July '14 by , under Super.

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Transition to retirement

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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