Fractional property investment specialist DomaCom is currently in discussions with Treasury to broaden the appeal and application of the equity release offering it launched earlier this year for retirees.
“One of the things we’re looking at speaking to Treasury about at the moment is to say if you’ve got an SMSF with a smaller balance, say $300,000, but you’ve got your million-dollar house, you can use the equity release facility to take advantage of the downsizer contribution provisions,” DomaCom chief executive Arthur Naoumidis told selfmanagedsuper.
“This is a real estate transaction and the vendor is selling a portion of the house. So if you’re allowed to put $300,000 toward your super if you are selling a whole house and moving from a three-bedroom house into a two-bedroom town house, or whatever it is, well why shouldn’t you sell a bit of your house via this product and put that into your super? It achieves the aim of enhancing your retirement savings funding.
“So we’re going to put this to the new inquiry into retirement incomes because we think that’s a great way of topping up your super.”
Naoumidis said SMSFs are appropriate vehicles to provide funding for the equity release arrangements DomaCom is offering.
“If you’re male, 45 years old and have an SMSF, you’ve got around 22 years before you can touch your money. The average need of funds for individuals looking to use an equity release arrangement is 15 years. So there is a timing match,” he noted.
He pointed out the return for the SMSF would be 3 per cent a year after all property management fees.
“That’s probably better than you’d get from most residential property investments when you factor in all the other costs,” he said.
“So you get a 3 per cent income, which is set for life, and the capital growth on the property.”
Domacom introduced its equity release product to the market in June, along with an associated accredited course for financial planners wanting to recommend it.