Over the years, buying property through a Self-Managed Super Fund (SMSF) has been increasing in popularity for Australians looking to increase wealth - but the SMSF space is also heavily regulated. Before making any decisions, it’s important to take the time to understand what the ATO says about what’s allowed, what’s not and how to avoid expensive mistakes.

Key ato compliance rules

Must comply with the Sole Purpose Test (which is to provide retirement benefits to its members, or death benefits if a member dies before retirement).
Must not breach related party transaction rules.
Must have accurate records, proper documentation and SMSF Investment Strategy.
Must ensure all transactions are at market value and properly reported in the annual return.

Can you buy property with an smsf?

The short answer is yes, BUT under strict conditions. Your SMSF can purchase a property if:

The property meets the Sole Purpose Test
It is not lived in by a Fund member or their relatives.
It is not rented by a Fund member or their relatives.

Types of proeprty you can buy

Commercial property

Can be leased to your own business, but must have terms that include arm’s length terms: market rates for rent, written lease, etc.

Residential property

Must be purchased from an unrelated third party.
Cannot be lived in or rented by a related party.

Borrowing through an smsf (LRBA Rules)

LRBA = Limited Recourse Borrowing Arrangement

You can borrow via an LRBA to fund an asset or a collection of identical assets that have the same market value. But:

It must be set up correctly
The loan must be on commercial terms
Only the asset being purchased can be used as security
You cannot improve the property with borrowed funds (repairs only)

Note: the asset is heled separately in a Trust outside of the SMSF. This keeps the other assets of the SMSF protected if the loan defaults.

Common pitfalls to avoid

Purchasing from or leasing to a related party.
Poor record keeping and no investment strategy on file.
Misinterpreting SMSF compliance, regulatory and borrowing rules.

Why you need an smsf accountant

An experienced SMSF accountant can:

Help structure the purchase correctly, right from the beginnning
Ensure ATO compliance and reporting obligations are met.
Work with your financial adviser and lender.
Keep your investment strategy aligned with your fund’s objectives.

Why refresh advisory is the perfect smsf accountant for you

We have an in-house SMSF Specialist Advisor, accredited with the SMSF Association. Everything is done onshore and we have built a strong network of service providers who can support you every step of the way (e.g. SMSF auditor, property valuer, financial planning, brokers, etc.).

Ready to maximize your super strategy?

Book a free consultation with us today!

Can Your SMSF Buy Property? Here's What the ATO Says