Property Investing and SMSFs – The Differences

2 September 2022

Australians love to invest in property. And what’s not to love? It’s tangible, offers diversification and tax benefits, and can provide you with a good income and strong capital growth.

The benefits of investing in property can be amplified when held within super and with changes to borrowing within Self-Managed Super Funds (SMSFs) over the last decade, the ability to access property investment through super has widened significantly. This strategy however, is not for everyone and a well thought out plan is critical to your long-term success.

Investing in property within a SMSF is not a straightforward proposition. It is a highly regulated affair and having an understanding of the rules is essential to ensure your fund remains compliant and you don’t get caught out in a compromising and costly position.

If you’d like to learn more about SMSFs, check out our article on The Pros and Cons of an SMSF.

What type of property can be purchased within a SMSF?

You can purchase all kinds of property within your SMSF – commercial, industrial or residential. But there are different regulatory requirements for each.

Residential Property

Any residential property you wish to purchase through your SMSF must:

  • meet the ‘sole purpose test’ – this essentially means the fund must be run for the sole purpose of providing retirement benefits to its members;
  • not be purchased from a related party to the member such as a spouse or family member;
  • not be rented or lived in by a member or party related to the member.

Commercial or Industrial Property (Business Real Property)

Similar to investing in residential property, any commercial or industrial property investment must also meet the sole purpose test. Except that you can rent commercial or industrial property to operate your business (business real property) from your SMSF – provided it’s at market rates and at arm’s length.

When can a SMSF borrow?

In the event that you have insufficient capital within your SMSF to purchase the property outright, your Fund can borrow to purchase property through the use of a limited recourse borrowing arrangement.

Be aware that borrowing arrangements through super can be very restrictive. There are rules around acquiring property using borrowings.

For example, although a SMSF can purchase a vacant block of land, it cannot purchase a block of land with the view of constructing a house on the block using borrowings. This would breach the ‘single acquirable asset rule’.

Under this rule, a house and land package would generally not be treated as a single acquirable asset unless there are only two payments involved, e.g. a 30% deposit and a 70% payment of the balance when the house is complete.

You should be cautious when it comes to investing in property through your SMSF.

Investing in property through super is not advisable for everyone. Before signing any type of contract always seek advice from a licensed financial planner or authorised SMSF specialist to help guide you through the process and make sure you have a clear plan that will work for you over the long term.

Need Advice on SMSFs?

If you are unsure whether a SMSF is suited for you or want help with your existing SMSF, consult with a financial advisor.

Do you want to get started with financial planning? Cambio Group is here to assist you at every financial stage of your life and achieve your goals within your desired timeframe.

Get in touch with us today! 


Disclaimer: The information (including taxation) in this website does not consider your personal circumstances and is of a general nature only – unless otherwise stated. You should not act on the information provided without first obtaining professional advice specific to your circumstances.


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