Can you buy property with your self-managed super fund?

December 9, 2021 BY

LEIGH DELEDIO // Director, UFinancial

A self-managed super fund or SMSF is a type of superannuation trust created to provide financial benefits to its members in retirement.

As a trust, all members of an SMSF are individual trustees or directors of the corporate trustee. Thus, the main difference between SMSFs and other super funds is that SMSF members are also the fund’s trustees.

The fund trustees are responsible for complying with the super and tax laws and regularly reviewing the fund’s investment strategies.

These strategies need to be managed in the best financial interests of fund beneficiaries and in accordance with the law.

Besides allowing members to manage their own nest egg, self-managed super funds also have another perk: an SMSF trustee can borrow funds from a third-party lender to purchase a single asset with a limited recourse borrowing arrangement. This single asset could be a residential or commercial property.

LEIGH DELEDIO // Director, UFinancial


Borrowing rules and requirements

Some loans are limited by the size of the SMSF and minimum contribution requirements. The general borrowing conditions are strict, and the fund must comply with a few rules.

The property must:

  • meet the ‘sole purpose test’ of solely providing retirement benefits to fund members
  • not be acquired from a related party of a member
  • not be lived in by a fund member or any fund members’ related parties
  • not be rented by a fund member or any fund members’ related parties, and
  • not be changed until the SMSF property loan is paid off.

For commercial properties:

  • A fund member can lease the property for their business
  • The property must be leased at the market rate, and
  • You can read more about SMSF rules on the Australian Taxation Office website.

As well as complying with the rules, trustees should also assess whether the property investment is consistent with the investment strategy and the fund’s risk level. An SMSF loan is a great option if you are not able to buy an investment property as an individual. If you are considering gearing your super into property, talk to one of our brokers today.

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