Investing in property through a Self-Managed Super Fund (SMSF) has become a popular wealth-building strategy. However, there are specific rules and regulations you need to follow. This guide will walk you through how to purchase property using your SMSF and what to consider before taking the plunge.
Step 1: Understand the SMSF Rules for Property Investment
Your SMSF can buy residential or commercial property, but it must comply with the ‘sole purpose test’—meaning the property must be held purely for retirement benefits, not personal use.
Step 2: Consider SMSF Borrowing (Limited Recourse Borrowing Arrangement – LRBA)
If your SMSF doesn’t have enough funds to buy a property outright, it can borrow money under a Limited Recourse Borrowing Arrangement (LRBA). However, strict conditions apply, such as:
✔️ The loan must be used to buy a single acquirable asset.
✔️ The property cannot be lived in by fund members or their relatives.
✔️ The lender’s recourse is limited to the asset itself, not other SMSF assets.
Step 3: Choose the Right Property
Many SMSF investors buy commercial properties to lease back to their businesses. This can be a tax-efficient strategy, but it’s important to get legal and financial advice before proceeding. It is also a good time at this point to discuss borrowing power with the 360 Mortgage Solutions Team here.
Step 4: Ensure Ongoing Compliance
SMSF property ownership involves ongoing compliance, including annual audits, tax reporting, and ensuring the property remains within the fund’s investment strategy.
Is SMSF Property Investment Right for You?
Buying property with an SMSF can be a smart long-term strategy, but it’s not suitable for everyone. Consulting with an SMSF specialist or financial adviser will help ensure you meet all legal and tax obligations while maximizing your retirement benefits.
💡 Looking to invest in property through your SMSF? Speak to a specialist to explore your options