SMSF Property

Self-Managed Super Funds

Self-Managed Super Funds
and property investing:
a comprehensive guide

Just like all types of superannuation,
Self-Managed Super Funds (SMSFs) allow people to save for their retirement while they’re earning an employment income.
The goal of superannuation is to add
capital into the accounts and use different investment opportunities to grow
these funds.

SMSFs differentiate from other super funds as the members of the account are also the trustees, so they have some more investment freedoms and the associated fees
are lower. On the flip side, members have to manage the fund themselves and are responsible for complying with superannuation regulations and tax laws. SMSF also provides a worthwhile avenue to use superannuation to buy property and harness the benefits of an investment
asset as well as a chance to generate
rental income.

Superannuation investments must be based around the sole purpose of adding to the retirement benefits of the members, so using an SMSF to purchase property comes with strict controls to make sure this is the case.

What is a SMSF?

An SMSF is a private super fund managed by individuals saving for their retirement, known as the ‘members’ of the fund. Instead of paying money into a traditional industry or retail super fund, SMSF owners put their dedicated super money into their own SMSF and select their investments and insurance. SMSFs have a maximum limit of six members,
and most tend to have two or more. By combining their capital into one super, they have more money to invest and can earn bigger returns.

As a legal tax structure, SMSFs are run under similar regulations to traditional super funds, with their own Australian Business Number (ABN), Tax File Number (TFN) and bank account. This transactional bank account allows members to manage contributions and rollovers, buy investments and pay pensions and lump sums out of the fund.

This structure comes with extra responsibilities. As members are trustees; they’re responsible for the fund and take on more risk. But for those committed to managing their super and who can develop a good understanding of what’s involved, it also comes with more control and opportunity, which can make it an appealing option.

How to buy an investment property using your SMSF

SMSFs enable you to buy an investment property with your superannuation savings, helping you to grow the fund through smart property purchasing. Self-Managed Super
Fund property investment requires around $150,000 within the account in order to purchase an appropriate property, and you can choose whether you want to join the other partners in this investment or not.

The type of property you acquire in your investment will have different procedures as well as projected results and you can determine an estimate of these results through
our investment property calculator. Some investors might feel more comfortable investing in houses and residential units rather than commercial properties, such as office units, industrial warehouses and retail units, but it’s valuable to explore both options before you move forward.

Can you use a SMSF to buy residential property?

You can directly buy residential property with the money in your SMSF, except for when the property is bought from a related party or when a related party will be involved in the investment, like through tenancy. If you wish to purchase an investment SMSF residential property, you can buy it from a neutral seller and rent it to unrelated tenants as a way to generate income.

This restriction of involved related groups or individuals applies to you and the other members of the fund, which means you or your family cannot live in the property or use it as a holiday home. Due to the nature of residential investment properties and the increased owner involvement, they’re a less popular investment
option compared to commercial property.

Can you use a SMSF to buy commercial property?

SMSFs are also permitted to purchase commercial property as long as it meets the sole purpose of providing retirement finances to its fund members. Unlike residential properties, you can lease SMSF commercial property to your own business or a company related to your members, but the rent must be paid at the market value. Due to this opportunity for related usage and other benefits, it’s a much more popular option for SMSF managers.

The loan criteria for SMSF commercial property investments are stricter than conventional lending and have a smaller loan to value ratios, but the benefits spread beyond loan potency, including:

Regular cash flow from commercial tenants

Low volatility which generally
makes it safer than share options

Longer leases compared
to residential contracts

Potential for capital growth
if market value and property value grows

Reduced tax when your SMSF
is in the pension phase

The opportunity to run your
own business in the property and pay rent into their retirement fund instead of an external landlord

What are the benefits of a SMSF?


Invest in property

One of the key benefits of an SMSF is investment choice and control.
An SMSF offers investment choices not available in an ‘industry’ or ‘retail’ super fund, such as direct residential and commercial property.


Borrow to invest

Generally, a limited recourse loan can be secured for 50% to 70% of
the purchase price of a property. This excludes other costs associated with the purchase such as Buyer’s Agent fees, legal, stamp duty and so on.


Minimise tax

When it’s time for you to retire, an SMSF will allow you to have a seamless
from the ‘accumulation phase’ to the ‘pension phase’ of super, without
the need to sell
down assets, therefore not triggering capital gains tax (CGT).
If you do sell the assets
held by the SMSF after retirement,no CGT
will be payable.


Protect your assets

An SMSF can be a structure that protects your assets from litigation and bankruptcy.

Frequently Asked Questions

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Speak to our investment strategy experts

SMSF property investing provides avenues for secure super growth, as well as producing a valuable asset when it comes time for your retirement. But important regulations and compliance issues surround SMSF property and the intricacies of each venture,
so it needs to be done right for a
worthwhile investment.

At Rethink Investing, we have a dedicated team for financing. Our commercial and residential property buyer’s agents are supported by a team of experienced mortgage brokers: led by Director & Senior Mortgage Broker, Son Pham.

What does this mean for our clients? Access to premium brokers, superior expertise, and an in-depth understanding of the Australian property market. Pair this with exclusive access to over 30 lenders and thousands of loans, and rest assured that you’re getting the best rate on the market. Learn more about our finance team here, and maximise your retirement funds today.