New Halal SMSF solution removes barriers to ethical property investing for Australian Muslims

A rapidly growing Islamic financial services provider has launched an Islamic self-managed super fund (SMSF) solution for members of the Australian Muslim community who want to invest in property for their retirement in a way that is compatible with their faith.
Sydney-based Meezan Wealth Management Founding Director Rokibul Islam said the solution, which is called Al-Mustaqbal Islamic SMSF, had been well received by Islamic medical, and other professionals and he expected strong interest from skilled migrants and Islamic family members who wanted to pool funds in an SMFS to buy property.

Up until now Islamic Australians who want to save for their retirement in an Islamic compliant way could invest in Meezan’s Islamic superannuation fund which largely decide where their member’s money is invested in a Sharia compliant way. With an Islamic SMSF they now have an alternative.

Members of the Islamic community in Australia, which is approaching one million people, overwhelmingly preferred to invest in property over any other asset class because of its physical nature and history of steadily increasing value. However, borrowing money to buy property and paying interest was forbidden (riba) under Islamic finance (Sharia) principles, Mr Islam said.

With the Islamic SMSF structure this issue was overcome as Meezan Finance could provide funding which followed Islamic Musharaka principles. Money borrowed to buy the property, which was placed in an SMSF, was repaid as rent and dividends rather than interest.

The SMSF initiative follows Meezan’s launch of a low-cost digital investing solution for the wider Australian Muslim community last year as part of a holistic approach to Islamic wealth management that also includes providing access to Islamic pensions, financial advice and retirement and estate planning.

Mr Islam said the Islamic SMSF worked on a number of different levels. Firstly, because buying property in Australia, particularly in Sydney was expensive, many Australian Muslims struggled to come up with the needed 20% deposit. Because a single SMSF can have up to six members, family and friends could pool their money to get a Sharia compliant loan and buy an investment property held in an SMSF which they jointly control. Using this approach, Muslim investors could develop a property portfolio for long-term capital growth,” he said.

Mr Islam added: “The amount people can borrow is not determined by their income but rather by the size of the regular employer compulsory and voluntary personal contributions to the SMSF fund. Rent from the property would be taxed at a flat 15% rather than higher personal income or company tax rates and when the property is eventually sold for a greatly increased price it will be tax free as it will be free of capital gains tax.

“It is a religious, ethical and tax efficient win-win-win solution for Australian Muslims that was not available before,” Mr Islam said.


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