Property – a potential liquidity risk for SMSFs?

Executive Manager, SMSF Technical & Private Wealth, SuperConcepts
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Superannuation funds that purchase ‘lumpy investments’ need to ensure that they understand the liquidity risks that may come with them.  Property is probably the most common lumpy asset, but it could include other fund investments that are difficult to sell or liquidate due to unfavourable market conditions.

Ownership of a property, whether it’s residential or commercial, can have some advantages because of the low tax rates in superannuation, the ability to gear the property if required and that any additional cash flow may be supplemented from contributions being made to the fund.

However, there is a downside which comes with the inability to lease the property, costs of renovations and improvements, death of a fund member and issues if contributions can’t be made to the fund.

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