SMSF property

The property market across Australia has been somewhat mixed over the last few years. It has led to many people considering their superannuation as a source of capital to invest in property. Most people know we can invest in direct property within our SMSF but how does it work, what can I do or not do and who can help me?

We get many people calling us regarding SMSF’s and super so I thought I would go through our most popular questions. Property can be a great opportunity to build your wealth for retirement but it is very important to get it right. And don’t forget to consider your investment strategy when making investment decisions with your super.

What types of property can my SMSF invest in?

Answer: An SMSF can invest in residential property (such as apartments, houses or townhouses) and commercial property. It can also invest in land that may be mixed use (so part commercial & residential) and even farms.

It is important to add here that although you can purchase all types of properties, an SMSF cannot purchase residential property from a related party. If the property is commercial property then it may be possible for the fund to buy this asset from a related party.

Click here if you would like to set up a SMSF for a property purchase

Who can rent or lease the property?

Answer: This is a very common question and the type of property will give a very different answer. If the property is residential then anyone except yourself and your related parties can rent the property. A related party is defined here.

If the property is a commercial property then related parties (including fund members) can lease the property as long as it is being used wholly and exclusively in the running of one or more businesses. A lease agreement needs to be in place and the rent must be at market rates.

Can I stay overnight in my residential property?

Answer: NO! You or your related parties cannot stay in the property. Even if you have just finished cleaning up the backyard to get ready for tenants you cannot stay there.

What if I pay market rent to stay there?

Answer: Even if you pay rent for the night this would be classified as an in-house asset and the fund would be in breach. Read our blog on other types of in-house assets here.

Can I borrow to purchase my SMSF property?

Answer: Yes. The rules are strict but it can be done. They are called limited recourse borrowing arrangements and you can find out more in our blogs and case study below:

What is a limited recourse borrowing arrangement? 

How can related party borrowing help you purchase property in your SMSF?

Borrowing within super

Click here to see our SMSF packages for property investments

Can I transfer property out of my super fund?

Answer: Taking anything from super whether it be cash or assets can only be done when a condition of release has been met. Typically this is retirement or age 65. But once you have met these conditions you are welcome to take any assets from the fund. With a property you would need a lawyer to help you prepare the transfer documents and assist with any potential stamp duty issues but once finalised you can move into your property without breaching any rules. It is now yours to use as you wish.

Can I transfer property into my super fund?

Answer: If it is a commercial property then yes you can, however you need to be conscious of the contribution caps and potential personal tax impact. The property must be used wholly and exclusively in the running of a business prior to transferring to your super fund. We have a great case study here.

I really want to stop renting but can’t afford my own home yet. Can I use my super fund to buy my home?

Answer: Definitely not. All super fund assets are prohibited from use of a personal nature. Once you have retired or reached age 65 you can transfer the property out for personal use but until then it is strictly hands off!

 Contact us HERE to discuss property and your SMSF.

This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.