Buying Property in an SMSF – A Smart Investment
Investing in property through an SMSF offers tax benefits and greater control, but understanding the rules, costs, and risks is crucial.
Benefits of Buying Property in an SMSF
Tax Advantages – Rental income is taxed at 15%, and capital gains may be reduced to 10% if the property is held for over a year. Learn more at Revenue NSW.
Control Over Investments – An SMSF allows you to directly manage your investment choices and align them with your retirement goals.
Potential Growth – Property can provide long-term capital appreciation and rental income, contributing to your retirement wealth.
Key SMSF Rules & Considerations
Sole Purpose Test
SMSF properties must solely provide retirement benefits to fund members. They cannot:
- Be purchased from a related party
- Be lived in or rented by fund members or their relatives
Read the full rules on MoneySmart
Borrowing Restrictions
SMSFs can borrow to purchase property under a Limited Recourse Borrowing Arrangement (LRBA), but:
- Borrowed funds cannot be used for renovations.
- Improvements must be funded from existing SMSF resources.
More on SMSF borrowing – CPA Australia
Diversification Risks
SMSFs should avoid investing too much in a single property, as this increases financial risk. Diversification helps:
- Balance returns
- Reduce risk exposure
- Improve long-term fund stability
What Does It Cost to Invest in Property Through an SMSF?
Upfront Costs
Stamp Duty – A tax on property purchases.
Legal Fees – Costs for conveyancing and contracts.
Advisory Fees – Financial and SMSF setup advice.
Ongoing Expenses
Property Management – Fees for leasing and maintenance.
Maintenance Costs – Repairs and upkeep expenses.
Insurance – Landlord and building insurance.
Compliance Costs
SMSF Audits – Required annual compliance checks.
Admin Fees – Fund management and reporting costs.
Ongoing Reporting – Regulatory obligations to remain compliant.
Our SMSF Property Services
Expert Property Search
We identify SMSF-compliant investment properties.
Access to on-market and off-market opportunities.
Tailored searches to match your financial goals.
Due Diligence & Compliance
We assess property suitability for SMSF investment.
Conduct rental yield and growth analysis.
Ensure compliance with ATO and SMSF regulations.
Negotiation & Acquisition
- We negotiate the best price on your behalf.
- Handle contract reviews and settlement coordination.
- Ensure a smooth transaction process from start to finish.
FAQ's About SMSF Property Investment
A Self-Managed Super Fund (SMSF) allows individuals to control their superannuation investments, including property. It must comply with ATO regulations and be managed solely for retirement benefits.
No. SMSF-owned properties cannot be used by fund members or their relatives for personal purposes. The property must be solely for investment to provide retirement benefits.
Most lenders require an SMSF loan deposit of 20-30% of the property’s value. However, borrowing is subject to Limited Recourse Borrowing Arrangement (LRBA) restrictions.
Only minor repairs & maintenance are allowed.
- Borrowed funds cannot be used for major renovations or improvements.
- Any upgrades must be funded from existing SMSF resources.
Key tax advantages:
- Rental income is taxed at 15% during the accumulation phase.
- Capital gains tax is only 10% if held for over 12 months.
- If the fund enters pension phase, rental income and capital gains may become tax-free.
Yes, but only through an LRBA.
- The loan is secured only against the purchased property.
- Higher interest rates and stricter lending rules apply.
