Mar 07, 2019

Our Insights

Using your super fund to buy property could be the best investment you make, but first you need to find out if it is the right move for you.

Buying property in a Self-Managed Super Fund (SMSF) isn’t exactly new – things really kicked off in 2007 when a regulation change effectively allowed investors to borrow money with their SMSFs to buy assets, which was a game changer.

Yet, more than a decade down the track, many people are still not aware of the possibilities with SMSFs and property.

What is a SMSF?

A SMSF is essentially a savings account for your retirement that you manage and control, instead of putting your nest egg in the hands of a corporate superannuation provider. SMSFs are a flexible way to save and invest into your retirement. 

This more personal and independent method allows you to take charge of your investment strategy and be intimately involved in the process. It can also offer tax benefits. It allows you to utilise the benefits of property investment, which has been seen as a relatively ‘safe bet’ for many Australian investors.

However, having complete control means having added responsibility. It is up to you to ensure everything is set up and managed correctly which requires a lot of time, energy and knowledge. 

Funding the property purchase

Typically, funds from the super account are used to invest in property for your SMSF. But if you don’t have the cash, you can consider borrowing through an SMSF property investment loan to purchase a property. Generally, lenders will require your SMSF to have a corporate trustee structure and can allow you to borrow up to 80% of the value of the property. 

Benefits of buying property with SMSF

There are a number of reasons why buying property with your SMSF could be a smart option.

Tax effective

The earnings within your SMSF are taxed at only 15% with a 33% discount for assets held for more than 12 months. Once in pension, your fund is no longer required to pay tax on any rental income or on capital gains when the property is sold.

Beneficial for business owners

While the rules prevent you from purchasing a residential property for yourself or a related party, it does allow you to buy a commercial or industrial property to lease back to your own business (on condition that you pay a current market rate of rent). This allows for extra funds to help grow the business. 

Diversify your super investments

A SMSF allows you to invest in a range of assets so that you’re not putting all of your eggs in one basket, so to speak. This could lead to high performing investments balancing out the negative, lowering the overall risk across the investment portfolio and evening out returns over time.


Buying property with a SMSF sounds like a no-brainer. But there are risks and challenges. 

Asset rich, cash poor

If the bulk of your fund is tied up in property, this can cause issues. If you need cash, property can take months to sell and could force you to sell property at the wrong time, impacting your return on investment. 

You always need cash in your SMSF to cover things like the auditing and administration of your fund, fees, advisory costs and various other circumstances.

Market risks 

If the Australian property market falls, your nest egg could be impacted. This not only impact the return on your SMSF property investment, but if you borrowed to fund the property the remaining debt could be crippling.


There can be substantial fees and charges associated with the purchase, ownership and sale of property in a SMSF. There are thousands of dollars in setup costs and sometimes higher fees involved in getting a loan through your SMSF with lenders. These costs should be balanced against long term benefits of the investment.   

No personal gain

You cannot benefit personally from the property. Investments within a SMSF must be purchased through an “arm’s length” transaction and must be sustained on a strict commercial basis. According to the ATO, one of the most common breaches is in assets that provide a pre-retirement benefit to a member or related party – e.g. renting a SMSF property to a family member.

Time-Consuming/Difficult to Manage

For individuals without a background in finance and tax, the administration of setting up and managing an SMSF can be quite challenging. Managing your SMSF is an ongoing task which requiring you to track of the performance of your investment and mistakes could lead to financial and legal consequences, relating to tax especially. The time and cost of ongoing property management also needs to be considered.

Seek advice

There’s a lot to consider!

Do your own research and find out if investing in property with an SMSF is something you are really interested in.

If you want to take the next step, talk to your financial adviser about the best strategy and how it fits with your broader wealth goals.

You will also need to work closely with your accountant to ensure you are compliant and, when the time is right, a great property team to ensure you maximise your investment.

Again, there are significant legal and financial consequences for any mistakes made with an SMSF, so please ensure you work with experts. 

For a more general look at SMSFs, read: How Can I Invest With My SMSF?

Calder Wealth Management are the wealth experts, and can help support your financial goals. Call us on (08) 8373 3333 to schedule your free initial appointment. 

Written by Ben Calder, Private Client Adviser at Calder Wealth Management.