Investors who own properties within self-managed super funds should be allowed to renovate them, according to a leading accountancy firm.
Ken Raiss, director of Chan & Naylor, is calling for the federal government to rewrite the laws surrounding SMSFs to allow renovations to take place. Under the current law, only repairs – alterations that reinstate an investment to its original condition – are allowed, and 'capital improvements' that add value, including many renos, are not.
"Astute investors may prefer to opt for a property whose capital value can be enhanced and improved through renovation and therefore attract improved rental return and capital value," said Raiss. "However this form of investment is currently ham-strung under existing legislation that doesn’t allow SMSF trusts to acquire a property and then undertake renovations while debt is still owed on the property."
"Therein lies the sting in the tail: you can invest in a property through an SMSF trust mechanism with debt, but you cannot contribute to its value unless you own the property outright," continued Raiss.
Raiss argued that addressing this impasse will encourage more ‘mum and dad’ investors to consider property as a viable alternative to stocks and shares,"with the long term benefits of a more sustainable retirement industry and a solution to the current rental housing supply shortfall".
What do you think? Should capital improvements be allowed in the SMSF environment? Discuss the issue at /.
