Buying property through self-managed super funds: what you need to know

buying property through self managed super funds what you need to know

If you’re considering setting up a self-managed super fund (SMSF) to invest in residential property, it’s important to understand the rules, risks and costs involved.

An SMSF is just that, but there’s more than one manager and multifarious financial commitments, legalities and responsibilities.

The Australian Taxation Office states that the difference between an SMSF and other funds is that members of an SMFS are also the trustees.

Members running an SMSF for their benefit must comply with the super and tax laws.

Is an SMSF right for you?

There is a range of essential steps for interested members of an SMSF. These include: considering why you are heading in this direction and what investment gains and responsibilities lie ahead.

Firstly, an SMSF must be run solely for providing financial benefits for its members.

The property must not be acquired from a related party of a member.

Related parties and members are also not entitled to live in or rent out the property.

So, if you are thinking it could gain you early access to your super or be used to purchase a holiday home or other home-related acquisitions, you should think again.

Financial expectations

To buy a residential property for your SMSF, a 20 to 25 per cent deposit of the property value, plus five per cent for completion costs, is generally required.

When it comes to SMSF property sales, there are also upfront, legal and advice fees, stamp duty, ongoing management fees and bank fees to account for.

The benefits

Contributions and rental income are used to pay off the SMSF loan.

This also accelerates the growth of your super.

An added advantage is that loan interest is tax-deductible to your SMSF loan, thereby reducing tax liability.

Once your SMSF fund owns the property outright, rental income can be used to fund retirement pension plans.

Setting up your SMSF

Your SMSF needs to be correctly set up in order to receive eligible tax concessions and other entitlements.

This is why it’s important to receive professional advice and assistance.

From choosing and appointing trustees to creating the trust, registration, ABN requirements, setting up a bank account and preparing an exit strategy – the financial minutiae of an SMSF is best left to professionals.

The inner workings

A number of post-establishment mechanisms, including contributions and rollovers; investing; paying benefits; winding up; administering and reporting, and SMSF auditors must also be considered.

Knowledge is power

Focusing on the fine detail paints the big picture for interested investors.

This includes annual and quarterly SMSF statistical reports that focus on SMSF population demographics, asset allocation tables, such as asset size and value; as well as age and income of SMSF members on a state-by-state or regional basis.

Official data sources, such as the Australian Bureau of Statistics and Stats NZ, can help in this area.

Government websites such as and can also assist in providing the latest information about SMSF rules and regulations.