Can I buy residential property through my SMSF for personal use?

No, SMSF rules strictly prohibit buying residential property for personal use, or for use by family or related parties. SMSF residential property investments must only provide retirement benefits to fund members, and cannot be used as a holiday home or rented to relatives under any circumstances.

Are there any exceptions for commercial property?

Yes, SMSFs can buy commercial property—including business premises—from members or related parties, provided the transaction is at true market value and the property is leased on commercial terms. For example, an SMSF can buy an office or warehouse and lease it back to the member's business at a fair market rent, as long as all documentation and valuations are in order.

Using SMSF To Buy Property

Q: Can my SMSF buy property?

Yes, a Self-Managed Super Fund (SMSF) can buy property—but only as an investment, and subject to strict rules. The property purchase must satisfy the sole purpose test, meaning it can only provide retirement benefits to fund members. SMSFs cannot buy property from, or lease property to, members or their relatives unless the property is commercial and leased on genuine market terms. You cannot use your SMSF to buy a residential property for yourself, your family, or related parties to live in or rent. Strict compliance and independent legal, financial, and tax advice are recommended. (Sources: Moneysmart, H&R Block, SMSF Australia)

Can My SMSF Buy Property?

Yes—but strictly only as an investment, and subject to stringent rules:

Must satisfy the sole purpose test, i.e. solely provide retirement benefits
No buying from or leasing to yourself or relatives unless it’s commercial property on market terms

You cannot buy residential property through your SMSF if you or family will live in or rent it.

Residential vs Commercial: What's Allowed

Property Type	Rules & Use
Residential Property	• Cannot be acquired from fund members or related parties • Cannot be lived in or used by trustees or their families
Commercial or Business Real Property	• Permitted if correctly structured • Can be leased back to your own business at market rent, with independent valuation and proper lease documentation

Borrowing to Buy: Limited Recourse Borrowing Arrangement (LRBA)

SMSFs can borrow under an LRBA, using a legal bare trust structure so only the property is at risk, protecting other fund assets
Loan-to‑value ratios are typically lower than personal mortgages, and fees and interest can be high
Repairs may be financed via borrowings, but improvements must use existing fund cash to remain compliant

Tax Impact & Yield Considerations

Rental income taxed at 15%, with a capital gains tax discount of 33% (10%) on assets held over 12 months
Once in pension phase, rental income and capital gains may be tax free (if within transfer balance caps)
Interest expenses on borrowed funds are deductible to the SMSF, but losses stay within SMSF and cannot reduce your personal taxable income

Costs, Risks & Compliance Requirements

SMSF property investment incurs: setup fees, legal and advice costs, stamp duty, valuation, property management, and auditing
Strict compliance rules: annual independent valuations, auditing, strict record keeping and adhering to the sole purpose test
Major banks now withdraw lending to SMSFs, so financing options are limited and expensive
Penalties for misuse (e.g. living in a fund’s residential property) can be severe

Is SMSF Property Right for You?

Before proceeding, consider:

Your balance—is it typically $200K+? SMSFs often won’t break even unless there’s scale
Diversification & liquidity—are you prepared to hold a non-liquid, single large asset?
Access to finance—can your fund sustain loan repayments from income or contributions?
Professional advice—must engage licensed financial advisers and trusted auditors throughout

Summary Table

Area	Key Points
Eligibility	Only business/commercial property — no residential use by trustees
Borrowing	Allowed via LRBA; strict structuring and higher cost
Tax Treatment	15% income tax; CGT discount of 33%; possible zero tax in pension phase
Compliance & Costs	Independent valuations; auditing; setup & ongoing expenses
Who it suits	Trustees with diversified strategy, long-term horizon and professional support

Ready to Use SMSF to Buy Property?

We Can Help You:

Confirm property type allowed in your SMSF’s trust deed and investment strategy
Develop a detailed cash‑flow and loan repayment model
Obtain independent valuations and tax advice in writing
Ensure legal structuring with a compliant bare trust and LRBA
Put formal lease documentation and rent reviews in place before transacting

Get In Touch With Our SMSF Agents

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