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Thinking of pulling money out of your super to buy that shiny new car? It might not be as easy as you think…
During the COVID-19 pandemic, the Australian Government allowed residents to withdraw money from their superannuation if they were financially affected by the pandemic.
RELATED: Discount registration for historic vehicles in Australia: Everything you need to know
Australian residents were allowed early release of up to $10,000 of their super between 20 April 2020 and 31 December 2020 if they applied through myGov. The COVID-19 early release of the super program closed on 31 December 2020, and applications can no longer be accepted.
You can still use your super to purchase a house through the First Home Super Saver (FHSS) scheme, which limits participants to taking out no more than $15,000 per year, or $50,000 in total, to put towards a mortgage.
But can you use your super to buy a car? Yes, you can, but only under certain circumstances.
Can I use super to buy a car?
You can only use your superannuation to buy a car as an investment, but not as a daily driver.
Using something called a Self-Managed Super Fund (SMSF), you can invest in a car using your superannuation.
According to the Australian Taxation Office (ATO), “A self-managed super fund (SMSF) is a way of saving for retirement. The members run it for their own benefit.
“If you set up an SMSF, you’re in charge – you make the investment decisions for the fund, and you’re held responsible for complying with the super and tax laws [SMSF is generally taxed at a concessional rate of 15 per cent].”
This means that you invest and manage your superannuation as you please and do not go through one of the major superannuation companies to invest. One way people are using their SMSF is to invest in a classic car.
Mark Chapman, Director of Tax Communications at H&R Block, says that people investing in a classic car via their SMSF have to adhere to strict guidelines.
“If you invest in a classic car via an SMSF, the car cannot be stored or displayed at your home or in a private residence of a party related to the SMSF, you must not drive the car, you cannot lease the car to a related party or be part of a lease agreement with a related party of your SMSF nor can the car be driven by anyone part of the SMSF.
“The car also has to be insured in the super fund’s name within seven days of purchase and the location of where it is stored must be well documented. The fund will be audited by independent auditors once a year and this will be checked.”
If you’re thinking, “what’s the point?”, it’s worth noting the car can still be driven by someone not affiliated with the SMSF and can be put on display somewhere like a museum.
“However, the car can be rented out for profit and driven by a third party not part of the SMSF. The collectable car can also be displayed by a third party not involved with the SMSF,” Mr Chapman added.
Unfortunately, that shiny lifted HiLux cannot be purchased with your super. Instead, you may have to buy something a little more classic and enjoy it from afar.
The post Can you use your superannuation to buy a car? appeared first on Drive.
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