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SMSF Property

Assuming you keep the property in your SMSF until you retire, you’ll pay no tax on the rental income in retirement and the tax rate will be only 15% until then.

Investing in property within your self-managed super fund (SMSF) can seem complex and overwhelming. We’ll try to clear up the confusion with straightforward answers to some of the most commonly asked questions.

1. Can I live in the property?

If you’re investing in property within your SMSF, there are a number of restrictions on who can live there. You – as a fund member – are not allowed to live in or rent the property.

2. Can my family, friends, mother, or siblings live in the property?

Likewise, no ‘related parties’ or relatives of fund members can live in or rent the property. The purpose of this type of property investment is to provide retirement benefits to the fund’s members or members’ dependants. ‘Related parties’ include other members of your fund, business partners of fund members, spouses or kids of those business partners, any companies those business associates control or influence, any trusts they control, employers who contribute to your super fund (also known as ‘employer-sponsors’), and any associates of employer-sponsors.

3. If I sell the property, do I get to keep the profits?

Any profits stay in your SMSF. Like other SMSF assets, you’ll gain access to that money when you reach retirement age.

4. Does the rent have to go into the SMSF?

Yes. All rental income goes into the SMSF. The good news is, assuming you keep the property in your SMSF until you retire, you’ll pay no tax on the rental income in retirement, and the tax rate will be only 15% until then.

5. Will the bank take security over my own house?

If you borrow money to buy a property within your SMSF, you must take out a separate loan in which only the property you’re buying is the security for the loan. This way, other assets in your super fund or from your personal life are separated. However, because lenders may consider these circumstances high-risk, they may require personal guarantee(s).

6. Can I borrow 90% of the purchase price?

Currently, the percentage you can borrow typically ranges from 65 to 70% of the property’s purchase price.

7. Do I have to keep my property until I retire?

No. But if you sell a property in your SMSF before you retire, any capital gains that the fund makes may be subject to tax.

8. Does it cost $10,000 to set up an SMSF for property investment?

No. Set-up costs vary widely across the industry.

9. I’ve heard that the legal minimum is $200,000 to set up an SMSF, is that right?

No. There’s no legal minimum; however, there are a number of things you’ll want to consider before you setup an SMSF. According to the Australian Tax Office (ATO), for example, funds with higher balances had lower operating costs than funds with balances of less than $50,000. The ATO estimates that annual operating expenses for SMSF’s are 0.56%. These expenses include set-up costs and ongoing maintenance fees, such as accounting fees, insurance, and charges you’ll encounter when you make investment decisions. You’ll also want to think about whether you’ve got the time and the know-how to manage your SMSF well. The easiest way to answer some of these questions is to seek professional advice first.

10. I’m married. Can I have my own SMSF that I don’t share with my spouse/partner?


For more information, ASIC publish a really great SMSF Property guide too.

If you’d like to chat about finance, please contact us.

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