For year ended June 2012 net new Self Managed Super Funds (SMSF) establishments were 37,174 - that is 39% higher then last year. Another 17,500 new funds were created till December 2012. Now Australia has 496,028 SMSF with 945,207 members.

By December 2012, a total of $474 billons were in SMSF assets of which $150 Billion were invested in listed shares, $135 Billion in cash and term deposits and $71 Billion in residential and non-residential property. These three sub-asset classes represent 75% of all investments.

Property subclass was the single largest change - over last 6 years since July 2007. This change is perhaps because of relaxing of borrowing rules introduced in September 2007. Net asset figures for property could be a bit inflated as ATO has not reflected data on borrowings by SMSF.

Click here to learn how to commence a SMSF

What is interesting to note is average member's age commencing a SMSF has been declining over this period. If you look at age distribution at the end of June 2012 for all funds compared to funds created in December 2012 quarter, in the below table, they suggest that recently, younger people are getting connected with their super, by commencing SMSF's and moving towards property to fund their retirement.

Property as an asset class generally shows low returns. This may not be true for those who own commercial property, self occupied or otherwise or those who own residential property in certain high yielding areas.

If trustees of SMSF's follow 4 interesting investors on the cover of April 2013 issue of Australian property investor magazine (click here to view), they can also generate high positive returns in owning residential property in some parts of Australia.

The most fascinating story is on Paul Flynn's, (not because he is a personal friend but because he started with nothing) who has purchased more than 500 properties for himself and his clients. He works as a buyer's agent. His focus is on "low end of the market and targets cash flow". You can read his story by clicking here.

Paul is not totally convinced to purchase property in SMSF, as he trades in properties, buys, renovates and sells. Some of Paul's activities may also be considered as business and not allowed in super (Section 62 - although some may argue that SIS Act does not disallow conducting a business if your trust deed allows it). Moreover, you cannot borrow, in super, to renovate a property which further restricts him to use SMSF as his priority get rich vehicle.

Click here to update your SMSF trust deed

However, for someone who is a retired investor a safe net tax free return of 10% plus a possibility of an upswing of tax free capital gain could be a very attractive investment as compared to a low interest paying term deposit and unpredictable share market. Imagine $100,000 tax free rental income from 4 - 5 residential properties (taxable income if they were outside super).

If you own a few residential properties and manage them yourself, it is possible to transfer them to your SMSF without paying any stamp duty (in NSW); however you could be up for capital gain tax. For further details read SMSFR 2009/1 example number 13, 14 & 15. Stamp duty will be payable if the investment property is currently held by any other entity other than in the members own name.

Those who are interested in moving their properties to their SMSF, this strategy will also benefit them with any tax free future gains when the property is ultimately sold in retirement phase or after death (legislation is pending after announcement in response to TR 2011/D3). But if these properties are held outside super, any future gain will attract further capital gain tax before or after death.

For example if the property was purchased for 100 and sold to super for 120 today and the member pays CGT on 20 and any future gain, say in another 10 years when the property is ultimately sold to an outsider for 150 - there will be no tax on the following 30 as the member would be in pension phase. Should the member die without selling the property, there would be no tax paid by the SMSF as the member would be considered to be in pension phase even after death.

Click here to learn how to commence a pension in your SMSF

However, if the property is held outside super - CGT will be paid before death if the property is sold and after death - only if the property is sold. If the investment property is transferred to kids after death, no CGT will be paid. This means that property can move outside super for generations without paying any tax.

Please note, usually all properties are not of the same value and it is possible that siblings may sell to distribute cash evenly. In this scenario CGT will be payable by the deceased estate before any distribution are made. Different rules apply to principal place of residence of the deceased.

To move residential properties to your SMSF, you will need to get an independent valuation (new valuation rules commenced on 8^th August 2012) for the property and if there is a debt on the property, you can arrange for the lender to your SMSF to extinguish this debt outside super.

Any purchase by the SMSF with borrowing has to be under a limited recourse borrowing arrangement and if you have several residential properties outside super, not all have to move into super at one time, you can select the ones which your SMSF should acquire from you to manage your CGT outside super.

Sometimes you have unencumbered commercial investment property, earning taxable income on which you pay tax, but have a loan on your own home which is not tax deductible. To get out of this double whammy, a simple strategy is to sell the commercial property to your SMSF and repay your own home loan.

Click here to learn how your SMSF can borrow

This related party transaction can happen in July, so that any capital gain tax payable on the transaction is paid 20 months later, at the time of lodging your income tax return. There are also provisions in the small business CGT exemptions legislation which can reduce your CGT bill to nil which may apply to your situation. Rental income in SMSF will not pay tax if all members are in pension phase. If some members are in accumulation phase and pension assets are not segregated, your SMSF will require an actuarial certificate to dertermine percentage of income which is taxable.

Click here to learn when you will need an actuarial certificate

No matter which strategy is implemented, capital preservation and correct investment advice is very important. Lastly, note that financial planners, who help you to buy shares, are not fully trained on property market (some own no investment property and have no idea on how it all works) and may deter you from purchasing high yielding property. What you need is a paid buyer's property agent like Paul who can help you to achieve 10% - 15% net rental return for your SMSF.

Standard Disclaimer: none of the above information should be construed as investment advice. Seek your own legal and tax advice.