Using Your Self-Managed Super Fund to Invest in Property
Self-Managed Super Funds (SMSFs) have become an increasingly popular vehicle for Australians looking to take control of their retirement savings and invest in property. With over 600,000 SMSFs in Australia managing more than $800 billion in assets, property investment through super has become a mainstream wealth-building strategy.
However, SMSF property investment comes with strict rules and compliance requirements. This guide will help you understand the opportunities, limitations, and key considerations before using your super to invest in property.
An SMSF allows you to use your superannuation savings to purchase investment property. The property is held in the name of the SMSF trust, and all rental income and capital gains remain within the super environment, benefiting from concessional tax rates.
To borrow money within an SMSF to purchase property, you must use a Limited Recourse Borrowing Arrangement (LRBA). This special structure protects your other super assets if the loan defaults - the lender's recourse is limited to the property itself.
Property is held in a separate bare trust (holding trust) until the loan is fully repaid
Each LRBA can only be used to purchase one asset (one property per loan)
You cannot use borrowed funds to improve or renovate the property
Once the loan is repaid, property transfers from bare trust to SMSF
Residential property purchased through an SMSF cannot be lived in or rented by fund members, their relatives, or related parties. Breaching this rule can result in severe penalties and the fund being made non-complying. Commercial property has more flexibility and can be leased to a related party business.
SMSF loans differ from standard investment loans. Here's what you need to know about rates, terms, and requirements:
Consult with an SMSF specialist accountant and financial adviser
Ensure your fund is properly established with appropriate trust deed
Document property investment in your fund's investment strategy
Work with an SMSF lending specialist to secure finance pre-approval
Set up the holding trust structure and complete the property purchase
Our SMSF lending specialists can help you understand your options and find the right loan for your self-managed super fund property investment.
Get in touch with our expert team today for a free consultation and personalized lending solution.
