Reasons to consider using your SMSF to invest in property


Major economic events like the GFC and the Covid pandemic taught us that things outside our control could severely affect our future wealth.
It showed there are no guarantees when it comes to trusting your hard-earned money to a fund manager you have never met.
These events played a part in a sharp uptick in the number of Australians establishing self-managed superannuation funds (SMSFs) to take control of their future-shaping investments.
Such is our country’s love for property, it makes sense that lots of these SMSFs want to invest in real estate.
Here are a few good reasons to consider doing so.


Not only is diversification a sound investment strategy but it is required by law for a SMSF.
So, you can take the stocks, bonds and whatever else that you may have already had in your super and diversify it further with real estate. It is a considerably different asset than the others, so ticks this box nicely. It also has inherent value, due to providing a physical place for people to live, so it can’t have its value wiped out in an afternoon like other investment classes.

Capital gains

History shows us property has had steady value growth over the decades. There is a consistent cycle of growth, plateau, correction, recovery and then further growth in most residential markets…And our population growth, combined with the limited housing supply suggests values will continue to appreciate over time.
Income to boost retirement
One of the big pros for property investing, in general, is the rental income…and landlords in 2023 are cashing in thanks to rising rents caused by historically low vacancy rates.
This rental income, in a SMSF, would boost your nest egg significantly because you can’t access it until you hit retirement age. So, if your SMSF purchased a rental property when you were 30 years old, you’d have at least 30 years’ worth of rent sitting in your fund when you hit 60, on top of the several property cycles worth of capital growth you would also have.
And of course, you can then keep using the rent in retirement as a passive income stream.

Tax benefits

Money earned in superannuation pays 15% tax, which is much less than in the regular working world. And once you hit the retirement stage and your SMSF begins drawing down a pension income, you’re exempt from any tax.
So it’s 15% until it’s none, and if you decide to sell at that point, you’ll also be exempt from capital gains tax (CGT).
Taking control
As the trustee of your SMSF, you can make strategic decisions based on your exact goals and risk tolerance, so you get to choose the type of property you invest in, its location and how it’s managed. Name a managed fund or other superannuation option that allows that!

Intergenerational wealth

SMSF property investments are better protected than personal investments. If there is a bankruptcy or insolvency, for example, the asset will generally be shielded from creditors.
You can also plan your estate, allowing you to pass on property investments to your children and grandchildren in a favourable tax environment.

Potential downsides

SMSFs are known for their complexity and arduous compliance demands. There are plenty of ways you can be tripped up if you don’t get the right advice or are not prepared to stay on top of your legal obligations.
When it comes to risk, you will be personally liable for all the fund’s decisions and management. You are also not protected against theft or fraud via compensation schemes that can be accessed by regular superannuation members.

Some property-specific downsides include:

  • 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 unless your SMSF buys it outright, it must be a safe bet for rental returns.
  • Banks require much larger deposits when lending to SMSFs because of the extra risks involved.
  • You can’t renovate to add value, only make repairs that maintain the property’s original state.
  • Despite the fact you can’t access rental income or other benefits until retirement, you are still negatively affected personally in some ways


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