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What is Property Investment through Self Managed Superannuation Funds (SMSF)?

Updated: Aug 11, 2023


Property investment through a Self-Managed Superannuation Fund (SMSF) involves using the funds within the SMSF to purchase and hold investment properties. A SMSF is a private superannuation fund that you manage yourself, giving you greater control over your investments compared to traditional superannuation funds. Property investment is one of the options available for diversifying and growing your retirement savings within an SMSF. You can also use SMSF to manage other assets, but these are outside the scope of this article.


To start off this article, let's take a look at what is SMSF.


What is SMSF?

In the Australian context, a Self-Managed Superannuation Fund (SMSF) is a private superannuation fund that individuals can establish to manage their own retirement savings. It is a legal structure designed to help hands-on investors save for their retirement and provides members with greater control over their investment decisions, investment strategies compared to traditional superannuation funds.


How do you use SMSF to invest in properties?

There are a few ways to start property investment through a Self Managed Super Fund (SMSF). Generally, here is hot investment through an SMSF works:

  1. Structure: An SMSF is set up with individual trustees or a corporate trustee. The trustees are responsible for managing the fund's investments and ensuring compliance with superannuation laws.

  2. Investment Strategy: Trustees develop an investment strategy that outlines the fund's objectives, risk tolerance, and asset allocation. This strategy guides decisions about investing in property and other assets.

  3. Property Purchase: The SMSF can use its available funds to purchase a property. The property can be commercial or residential. If the SMSF does not have enough funds to purchase the property outright, it can also use limited recourse borrowing arrangements (LRBAs) to borrow money for the purchase.

  4. Borrowing: LRBAs allow the SMSF to borrow funds from a lender to purchase a property. The property itself is used as collateral for the loan, and the lender's recourse is limited only to the property in case of default. This minimizes the impact on the SMSF's other assets.

  5. Ownership and Compliance: The property is owned by the SMSF, and all legal and regulatory requirements must be followed. For example, the property must be purchased at market value, and all expenses related to the property (e.g., maintenance, insurance, property management) must be paid from the SMSF's funds.

  6. Rental Income: Any rental income generated by the property is received by the SMSF and contributes to the fund's overall returns. Rental income must be used for the fund's expenses or invested according to the fund's investment strategy.

  7. Capital Gains and Tax: Any capital gains made from the sale of the property are subject to capital gains tax (CGT) within the SMSF. Different tax rules apply depending on whether the property is sold during the accumulation phase (before retirement) or the pension phase (after retirement).

  8. Compliance and Reporting: Trustees of the SMSF must ensure that the property investment complies with superannuation laws and regulations. This includes record-keeping, reporting, and adherence to the fund's investment strategy.

It's important to note that property investment through an SMSF comes with responsibilities and considerations, including legal and regulatory compliance, costs associated with property ownership, and potential risks related to market fluctuations and property management.


Before deciding to invest in property through an SMSF, it's recommended to seek professional advice from financial advisors, accountants, and legal experts with expertise in SMSFs and property investment. These professionals can guide you through the process, help you understand the risks and benefits, and ensure that your investment aligns with your retirement goals and complies with all legal requirements.



Not Financial Advice Disclaimer

General Advice Warning: This general information is meant for general educational purposes only. It is not professional financial advice from Concierge Buyers Advocates and does not take into account your personal needs and situation. You should not take this as your personalised and tailored financial advice. Concierge Buyers Advocates not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this article. Always seek appropriate financial advice. We have a panel of advisor partners who will tailor their advice based on your personal situations.

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