Top Things to Consider When Purchasing a Property with a Self-Managed Super Fund

Purchasing a Property with a Self-Managed Super Fund

Purchasing Residential Property with a Self-Managed Superfund (SMSF)

If you currently have a Self-Managed Superfund (SMSF) or are contemplating setting one up and are interested in the possibility of acquiring residential property with it, there are several factors you should consider. These include:

  1. Intended Usage of the Residential Property: You must determine how you plan to use the residential property.
  2. Funding the Property Purchase: Consider your strategy for financing the acquisition of the residential property.

For those considering using an SMSF to buy residential property in Australia, it’s vital to ensure compliance with the Superannuation Industry (Supervision) Act 1993 (SIS Act) and to adhere to the regulations set forth by the Australian Taxation Office (ATO).

A Self-Managed Superfund’s primary objective is to secure retirement benefits for its members. Therefore, the process of acquiring property through an SMSF necessitates careful consideration of the following three key aspects:

1. Compliance with the ‘Sole Purpose Test’

When contemplating the purchase of residential property through your SMSF, it is imperative to adhere to the “sole purpose test” to ensure it is eligible for the tax concessions normally available to super funds. This test dictates that each investment made or action undertaken by the SMSF is for providing retirement or death benefits to the beneficiaries of the SMSF. It cannot be established for any other purposes, such as acquiring a holiday property or a primary residence for personal use.

Additionally, any property acquisition must be conducted at arm’s length, which means it must be purchased at market value to accurately represent its true value.

2. Borrowing Constraints in SMSF

Investing in property through an SMSF is also subject to borrowing restrictions. If your SMSF lacks the necessary funds to acquire a property outright, it may be possible to secure a loan for this purpose. However, any borrowing should be carried out through a limited recourse borrowing arrangement (LRBA). This means that the lender can only seek repayment from the property purchased and not from any other assets held within the SMSF. It is important to remember that borrowing funds through an SMSF can be a complex and timely process.

Investing in a home through your SMSF is appealing because it allows you to utilise your retirement savings to purchase property which can earn you money through rent and being an asset that will hopefully increase in value over time.

3. Expenses Linked to the Property Must Be Covered by the Fund

A final consideration if you intend to purchase residential property through your SMSF, is to ensure the fund can cover the associated property expenses such as general maintenance and upkeep and property management. These costs must be funded by the SMSF itself.


  1. Consult your accountant to verify that the investment property you plan to purchase complies with SMSF rules.
  2. Avoid purchasing property from someone connected to your SMSF.
  3. Before signing a contract, have it carefully reviewed and seek legal advice to ensure it aligns with SMSF regulations.
  4. If you need to borrow money for the purchase, be sure to consult your Lender before signing the contract to understand the specific requirements associated with any loan.
  5. Be prepared for an extended approval process for financing. It is much more involved than a typical residential property purchase, so allocate extra time for the necessary documentation and approval process.


While using a SMSF to invest in Australian residential property it is imperative to seek guidance from a qualified Conveyancer with expertise in SMSFs. Additionally, obtaining financial advice on whether setting up an SMSF aligns with your goals is essential before making any investment choices.

If you require any further information, please contact us to speak with one of our legal team on 1300 224 828 and let us make it easy for you.

Important Disclaimer: The content of this article is general in nature and for reference purposes only. It does not constitute legal or financial advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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