Legislation changes, restrictions, the Royal Commission, uncertainty, COVID….there are so many issues impacting the financial sector in the last couple of years and this includes SMSF’s. But does any of this mean owning property in your SMSF is no longer? We certainly don’t think so.

Property is a very popular asset in SMSF’s and can still be one of the greatest benefits of managing your own super fund. Most people know we can invest in direct property within our SMSF but is it still viable, what can I do or not do and who can help me?

How has the last couple of years impacted SMSF’s and property?smsf property

Financial institutions became cautious with regard to SMSF lending and some even dropped out of the space entirely. Potential legislation changes threatened future borrowing arrangements in super and property market volatility is vastly different from state to state.

But lately, things have begun to settle again. There is no news about further changes and lenders are back to offering competitive rates to both residential and commercial property lending to SMSF’s.

We have started to see the buzz come back in property and SMSF’s!!!

What types of property can my SMSF invest in?

Answer: An SMSF can invest in residential property (such as apartments, houses or townhouses) and commercial property. It can also invest in land that may be mixed use (so part commercial & residential) and even farms.

Who can rent or lease the property?

Answer: This is a very common question and the type of property will give a very different answer. If the property is residential then anyone except yourself and your related parties can rent the property. A related party is defined here.

If the property is a commercial property then related parties (including fund members) can lease the property as long as it is being used wholly and exclusively in the running of one or more businesses. A lease agreement needs to be in place and the rent must be at market rates.

Can I borrow to purchase my property?

Answer: Yes. They are called limited recourse borrowing arrangements and you can find out more in our blogs and case study below:

What is a limited recourse borrowing arrangement (LRBA)?

How can related party borrowing help you purchase property in your SMSF?

Can I transfer property out of my super fund?

Answer: Taking anything from super whether it be cash or assets can only be done when a condition of release has been met. Typically this is retirement or age 65 (depending on your year of birth). But once you have met these conditions you are welcome to take any assets from the fund. With a property you would need a lawyer to help you prepare the transfer documents and assist with any potential stamp duty issues but once finalised you can move into your property without breaching any rules. It is now yours to use as you wish.

Can I transfer property into my super fund?

Answer: If it is a commercial property then yes you can, however you need to be conscious of the contribution caps and potential personal tax impact. The property must be a used wholly and exclusively in the running of a business prior to transferring to your super fund. We have a great case study on our website. See the link below:

In specie transfer of assets to super

Property prices are really high where I live. Can I use my super fund to buy my home?

Answer: Definitely not. All super fund assets are prohibited from use of a personal nature. Once you have retired or reached age 65 you can transfer the property out for personal use but until then it is strictly hands off!

Property and your SMSF can be confusing at times but we are here to help so get in touch with us here

This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.