Investing In Property With An SMSF

Thinking about buying property through your super? A Self-Managed Super Fund (SMSF) gives you greater control over your retirement savings and investing in property is one way to grow that nest egg. But strict rules apply and it’s not the right path for everyone.

In this guide, we explain how SMSF property investment works, including key requirements, benefits, borrowing strategies and answers to common questions.

What Is A Self-Managed Super Fund (SMSF)?

A self-managed super fund (SMSF) is a private superannuation fund that you manage yourself. Unlike retail or industry super funds, SMSFs give you full control over how your super is invested, including the option to invest in property.

But with that control comes responsibility. SMSFs must comply with strict ATO rules and reporting obligations, especially when it comes to buying assets like property.

Can an SMSF Buy Property?

Yes but there are several rules you must follow.

The property must:

• Not be purchased from a member or a related party
• Not be lived in by any member of the fund or their relatives
• Not be rented to any related parties
• Meet the sole purpose test – to provide retirement benefits only

If these conditions are met, your SMSF can invest in residential or commercial property. Any rental income will be taxed at a concessional rate of 15%, and capital gains tax is reduced to 10% if the property is held for more than 12 months.

How To Buy Property With An SMSF

The process starts by ensuring your SMSF is correctly set up and compliant. You’ll also need a documented investment strategy that allows for property. From there, you’ll assess your fund’s balance to determine whether a purchase is realistic — and whether borrowing is required.

Next, you’ll seek financial and legal advice before identifying a suitable investment property that complies with SMSF rules. If borrowing is needed, it must be done through a Limited Recourse Borrowing Arrangement (LRBA). Once the transaction is complete, your SMSF becomes responsible for managing the loan, property, and all related compliance requirements.

SMSF Borrowing Explained

SMSFs can borrow to invest in property through a Limited Recourse Borrowing Arrangement (LRBA). This special structure ensures the lender’s recourse is limited to the property alone, protecting other SMSF assets.

To do this, the property is held in a separate trust while the loan is repaid by the SMSF using rental income and super contributions.

For residential property, you’ll generally need a 20–25% deposit and an additional 5% for purchase costs like stamp duty and legal fees. For commercial property, a deposit of around 30% is typically required, plus extra for completion costs.

Benefits of Buying Property in an SMSF

Buying property through a Self-Managed Super Fund (SMSF) comes with several strategic advantages for investors looking to grow their retirement savings. Some of the key benefits include:

• Tax efficiency: Rental income is taxed at just 15%, and capital gains tax is reduced to 10% if the property is held for more than 12 months.
• Greater investment control: You have full oversight of how your superannuation is invested, including property selection.
• Leverage through borrowing: SMSFs can borrow to invest in property under a Limited Recourse Borrowing Arrangement (LRBA), allowing you to access higher-value investments.
• Wealth-building potential: Property purchased through an SMSF can help accelerate the growth of your retirement nest egg through capital growth and rental income.
• Diversification: Adding property to your SMSF portfolio helps balance risk by diversifying beyond shares and managed funds.

Risks and Responsibilities

While the benefits are attractive, there are also risks to consider.

Property is a lumpy, illiquid asset, meaning it can’t be easily sold if your SMSF needs to pay benefits or expenses. You’ll also face ongoing costs, including accounting, auditing, compliance and property management fees.

ATO compliance is non-negotiable. Renting the property to a family member, using it personally or failing to structure the loan correctly can result in significant penalties.

It’s important to seek professional advice and understand the long-term implications before proceeding.

How Much Money Do I Need In My SMSF To Buy A Property?

Technically, there’s no legal minimum balance required. But in practice, most experts suggest you’ll need at least $200,000 in your SMSF for property investment to be viable.

This covers:

• Your deposit (20–30%)
• Purchase costs (stamp duty, legal fees, etc.)
• Ongoing expenses to run the fund and property

Without a sufficient balance, your SMSF may become too heavily concentrated in one asset, which can raise compliance concerns.

Can I Live In A House Owned By My SMSF?

No, you can’t live in the property, even temporarily, while it’s owned by the fund. You’re also not allowed to rent it to yourself, family members or any related party.

This restriction ensures the property meets the sole purpose test of providing retirement benefits, not personal enjoyment or convenience.

Can I Live In My SMSF Property When I Retire?

Not immediately but there is a pathway.

Once you retire and start drawing a pension from your SMSF, the fund can transfer the property to you personally, provided it’s done at market value and in line with ATO rules. Only then can you move in and use it as your residence.

This type of transaction requires financial and legal advice to manage tax implications and maintain compliance.

Pros and Cons Summary

Contact Our Experts

At Carbon, we understand that SMSF property rules can be confusing. Whether you’re just starting to explore your options or ready to take action, our team is here to help you make confident, compliant decisions.

We support clients in Brisbane, Perth, Melbourne, Adelaide and Sydney with fund setup, strategy, and ongoing administration.

Call us on 1300 454 174 or use our contact form to speak with one of our SMSF specialists today.

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