A Guide to SMSF Investment in Real Estate


To purchase property through your self-managed super fund (SMSF), you must comply with specific regulations. The property must pass the “sole purpose test,” which means its sole objective is to provide retirement benefits to SMSF members. It cannot be bought from a related party of a member, and neither the members nor their related parties can reside or rent the property. If the SMSF invests in a commercial property, it can be leased to a member for their business, but it must follow specific guidelines and be leased at the market rate.

Before purchasing property through your self-managed super fund (SMSF), it’s essential to be aware of the fees and charges involved. These fees may include upfront fees, legal fees, advice fees, stamp duty, ongoing property management fees, commissions for agent, bank fees, and loan costs.

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Borrowing for property through a self-managed super fund (SMSF) involves a limited recourse borrowing arrangement (LRBA), which has strict borrowing conditions. It’s crucial to evaluate whether investing in property aligns with the SMSF’s investment strategy and risk profile. Risks associated with SMSF property investment include higher costs, cash flow issues, loan balances, difficulty canceling, possible tax losses, and restrictions on property alterations. Seeking advice from a licensed financial adviser is crucial to understand and manage these risks.

When dealing with property developers who offer financial advice on setting up an SMSF, it’s crucial to exercise caution and verify that they hold an Australian financial services (AFS) license, which can be checked through ASIC Connect’s Professional Registers. Be cautious of sales tactics such as competitions and avoid investing in unfamiliar property markets without conducting thorough research.

In conclusion, it’s crucial to be informed about the regulations and costs involved in buying property through an SMSF. Don’t be pressured into making property purchase decisions for an SMSF, seek advice from licensed financial advisers and to be cautious when investing in property markets.


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