fbpx
November 16, 2021 Natalia Forato

Can you buy property with your SMSF?

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. 

 

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
  • 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

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.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent.

Tax Time

What are you interested in?
  • This field is for validation purposes and should be left unchanged.

Free Property Report

  • This field is for validation purposes and should be left unchanged.

Talk to us today

  • This field is for validation purposes and should be left unchanged.

Download our free Property & Investment tips

Enter your details below to download
  • This field is for validation purposes and should be left unchanged.

Download our free Refinancing tips

Enter your details below to download
  • This field is for validation purposes and should be left unchanged.

Download your tax checklist

Enter your details below to download
  • This field is for validation purposes and should be left unchanged.

Download our free Home Loan tips

Enter your details below to download
  • This field is for validation purposes and should be left unchanged.

Download our free Money Management tips

Enter your details below to download
  • This field is for validation purposes and should be left unchanged.

Let's chat about a new loan

Upgraders
  • This field is for validation purposes and should be left unchanged.

Let's chat about property investment

Property Investors
  • This field is for validation purposes and should be left unchanged.

Let's chat about your refinancing options

Refinancers
  • This field is for validation purposes and should be left unchanged.

Let's chat about a loan for your first home

First Home Buyers
  • This field is for validation purposes and should be left unchanged.

Book your free chat

  • This field is for validation purposes and should be left unchanged.