How you can use your SMSF to buy property

How you can use your SMSF to buy property.

Economic downturns such as the GFC in 2008 taught a lot of Australians to be more engaged with their future. This was because the superannuation they took for granted suddenly started losing money. How could this be? Who was responsible?

Just those questions made people realise they had no real idea what was happening with the money that would supposedly sustain them in retirement. A portion of their pay had been sent to some faceless fund manager who then decided where to invest it. That fund manager was of course more focused on their career than the lifeblood of a bunch of people they had never met and would never have to answer to.

Since then, there has been a sharp growth in the number of people opening up self-managed superannuation funds (SMSFs) so they could take charge of their hard-earned money. Or at least have some say in what happened to it. Now, as economic uncertainty surrounds us once again, the need to be engaged is hitting home for people.

Safe as houses

An SMSF gives you control over where your money is invested. You can take your pick of investments such as property, shares and more.
It’s little wonder when you consider Australia’s love affair with property that many SMSF holders look at purchasing property within their super.
Holding an investment property in an SMSF could see you double your money in value and then double it again if you start young enough to notch up an extra growth cycle between investment and retirement.

Sounds good, so should I do it?

SMSFs require a significant commitment. Even with professional help, SMSF trustees spend an average of eight hours a month on fund administration such as researching investments, accounting, record keeping and arranging annual audits to ensure compliance.
Trustees also spend thousands of dollars annually on ongoing expenses such as legal and financial advice, auditor’s fees, management and admin expenses and levees.
If that all still works for you, here are the pros and cons when it comes to property investing within your super.


– You can use money already accumulated in your super to buy the property outright, or as a deposit if you need to borrow within your super.
– You will only pay 15% tax on rental income and if you sell the investment property after holding it for 12 months, but before retirement (accumulation phase), your CGT is calculated at a discount rate.
– If you sell it at retirement age (pension phase) you don’t have to pay any tax on the sale.
– Expenses involved with owning the property and receiving rental income are tax deductible within the fund.


– The investment must pass the sole purpose test: to provide retirement benefits to the fund members only.
– It cannot be bought from, rented to or used by a person or entity related to the SMSF member…so no living or holidaying there for you, your family or friends.
– You can only service any loans with 10.5% of your salary (11% as of July 2023), plus rental income, so it must be a safe bet for rental returns.
– Deposits required when lending to SMSF, can be 20% for residential loans and 30% for commercial.
– You can’t renovate to add value, only make repairs that maintain the property’s original state, so this may mean plenty of work to be done when you eventually retire.
– If you spend most of your balance on a property, there will be little room left for investment diversity within your SMSF, which is a requirement.- You can’t offset any tax losses against personal taxable income outside the fund and you can’t access any of the property’s rental income until you reach retirement age, so the cash flow can’t be put to use elsewhere.


Recent Posts