Is it possible to utilize your retirement savings to purchase a car?

Can I Use My Super to Buy a Car?

As the COVID-19 pandemic wreaked havoc on the economy, many Australians found themselves in financial distress. In response, the Australian government allowed residents to withdraw money from their superannuation if they were financially affected by the pandemic. This early release of super scheme allowed individuals to access up to $10,000 from their super between April 20, 2020, and December 31, 2020, by applying through myGov. However, this program has since ended, and no new applications are being accepted.

While the COVID-19 super program has come to a close, there are other ways to use your super for specific purposes. For instance, the Super savings for your first home (FHSS) program allows participants to withdraw up to $15,000 per year or $50,000 total to put towards a mortgage. But what about using your super to buy a car? The answer is yes, but with certain caveats.

Using a Self-Managed Super Fund (SMSF), individuals can invest in a car using their superannuation. According to the Australian Taxation Office (ATO), an SMSF is a way to save for retirement where members manage it for their own benefit. Setting up an SMSF allows individuals to make investment decisions for the fund and be responsible for complying with tax and supervisory laws. Typically, SMSFs are taxed at a concessional rate of 15 percent.

Investing in a classic car through an SMSF is one way individuals utilize their super for purchasing a car. However, there are strict guidelines that must be adhered to when investing in a classic car through an SMSF. The car cannot be stored or displayed in a private residence, driven, or leased to a related party of the SMSF. Additionally, the car must be insured in the name of the super fund within seven days of purchase, and the storage location must be well-documented. The fund will also undergo annual audits by independent auditors to verify compliance with these rules.

Although there are limitations on how the car can be used, it can still be driven by individuals not affiliated with the SMSF and displayed in venues such as museums. The car can also be rented out for profit and driven by third parties who are not part of the SMSF. However, investing in a classic car through an SMSF means that modern vehicles like a lifted HiLux cannot be purchased using super funds.

Overall, using super to buy a car is possible under specific circumstances. While the COVID-19 super scheme has ended, alternate methods such as the FHSS program and SMSFs provide avenues for utilizing super savings for different purposes. Ultimately, individuals should carefully consider their financial goals and needs before deciding to use their super for buying a car.