Superannuation and SMSF

Can I use my super to buy an investment property?

Adviser Dale Wicks Dale Wicks
30 November 2023
8 min read

Your superannuation fund is your financial lifeline for retirement. However, as you plan for your golden years, you might be wondering, can I use my super to buy an investment property to help secure a comfortable future? The short answer is yes, buying property in super is possible, but it's not as simple as it may seem, and it’s not suited to everyone. In this blog post, we'll explore the concept of buying property through your superannuation fund and the steps involved.

Understanding Self-Managed Super Funds (SMSFs)

To invest in property through your super, you'll need a Self-Managed Super Fund (SMSF). Unlike regular super funds, SMSFs offer greater control over your investments. But with greater control comes greater responsibility and to set up an SMSF you will have to take on responsibilities as trustee of your fund. The investment flexibility afforded by an SMSF is the foundation for using super for investment property purchases as it gives you the flexibility to make decisions about where your money is invested. But don’t forget, that flexibility comes with the responsibility for the compliance of your fund.

Investing in property through superannuation

Enabled by legislative changes in recent years, there has been a noticeable shift in the way people invest through their superannuation and many individuals are now exploring the possibility of using their SMSF to invest in property. This shift is not without reason. Property investment through an SMSF can offer substantial tax advantages and provide a pathway to long-term wealth building under the right circumstances.

SMSF property purchase – what’s allowed?

You can own the same types of property in a self-managed super fund that you can own in your own name - residential property and business real property. However, there are specific rules around owning a residential property in an SMSF, including:

  1. Sole purpose test: The SMSF property investment must meet the sole purpose test, which means it should solely provide retirement benefits for the members. You cannot use the property for personal use or rent it to family members.

  2. Related parties: You cannot purchase a residential property with an SMSF from a related party, and you cannot rent that property to a related party or transfer your existing residential investment property into your super fund.

The other type of SMSF property purchase you can make in an SMSF is business real property. This is a commercial property wholly and exclusively used for business purposes including manufacturing sheds, corner stores, and even farming properties, with special rules.

Business real property in an SMSF has several potential benefits, including tax advantages, asset protection, and the ability to use your SMSF capital to purchase the property.

The rules and regulations of SMSF property investment

In addition to the rules around the sole purpose test and related parties for residential investment properties, there are other rules and regulations that come with investing in property through superannuation. Here are some key points to keep in mind:

  1. Market value rule: All investments by your SMSF must be made on a commercial ‘arm’s length’ basis. So, investment properties must be valued at current market value and any leases also need to reflect current market value in the open market for a property of that type.

  2. Assets in the name of fund: It is a legal requirement of SMSFs that you invest in assets in the name of the fund – not in your own name.

  3. Borrowing arrangements: If you don't have enough funds in your super to buy a property outright, you may be able to establish a limited recourse borrowing arrangement (LRBA). This is a specific type of loan for SMSFs that allows you to borrow funds to purchase a property. The property is held in a separate trust until the loan is repaid.

  4. Property acquisition costs: Your SMSF must cover its own expenses related to purchasing the property, such as legal fees, stamp duty, and title transfer costs. However, it's crucial to ensure these costs are directly related to the property purchase and comply with superannuation laws.

The benefits of using your super for property investment

In the right situation, investing in property through superannuation offers several benefits:

  1. Tax benefits: Holding business real property in an SMSF can offer numerous tax benefits as SMSFs are tax-effective structures with super funds taxed at a rate of only 15%, which is significantly lower than other tax rates outside of super. Furthermore, owning your business premises in an SMSF and renting it to your business entity can lead to tax efficiency.

  2. Diversification: Property can be an excellent addition to your investment portfolio, providing diversification and potentially reducing risk. This can be particularly beneficial if your superannuation fund is heavily invested in traditional assets like shares and bonds.

  3. Asset growth and protection: SMSFs give you the ability to use your superannuation savings to help purchase a property investment.

The drawbacks of purchasing property in a self-managed super fund

Investing in property through superannuation is not a strategy that will work for everyone and when you’re asking yourself, ‘Can I use my super to buy an investment property?’ there are some disadvantages and risks you should be aware of before making a decision:

  1. Cash flow: Owning a property within an SMSF can pose cash flow challenges as property is relatively illiquid compared to other assets like shares. Ensuring that your property generates sufficient cash flow to cover your expenses is essential to maintain your fund's financial health. Moreover, when SMSF members reach the pension phase and start drawing income from their super, the minimum pension payment requirements must be met so planning for adequate cash flow is essential to meet these pension requirements without facing liquidity issues.

  2. Set-up and ongoing costs: Property investments within a Self-Managed Superannuation Fund (SMSF), generally incur greater set-up costs, especially when utilising an LBRA. In addition, SMSFs are separate entities with their own financial obligations, including property-related expenses and taxes which require annual tax returns and audit services that will incur additional expenses.

  3. Complexity: SMSF property investment is complex. And, as trustee of the SMSF, you will be solely responsible for all the investment decisions and compliance with the rules and regulations. If you decide to navigate this path, it’s critical you seek professional advice to help run the fund and advise you accordingly so that you can navigate through the rules and regulations.

Building your SMSF investment team

To navigate the complexities of property investment through an SMSF, it's essential to build a dedicated team of professionals, including:

  1. Accountant: An accountant who specialises in SMSFs will help ensure your fund complies with tax regulations and handles financial reporting.

  2. Financial planner: A financial planner can assist in creating a holistic investment strategy that aligns with your retirement goals.

  3. Legal professional: Legal experts will guide you through the legal aspects of property ownership within an SMSF.

  4. Lender: A mortgage expert will help you find the right lender and navigate the borrowing arrangements for your property purchase.

With careful planning and the right team of professionals by your side, the answer to ‘can I use my super to buy an investment property to help secure a comfortable future?’ is yes - property investment within your SMSF can be a valuable addition to your retirement portfolio, helping to provide financial security in retirement.

With an integrated team across SMSF, accounting, wealth management and lending, Findex has the knowledge and expertise to help you seize opportunities in property investment. If you’d like to discuss whether buying property in super is the right strategy for you, speak to our specialists today.


While all reasonable care is taken in the preparation of the material on this website, to the extent allowed by legislation Findex Group Ltd accept no liability whatsoever for reliance on it. All opinions, conclusions, forecasts or recommendations are reasonably held at the time of compilation but are subject to change without notice. Findex Group Ltd assumes no obligation to update this content after it has been issued. The information contained is of a general nature only and does not take into account your objectives, financial situation or needs.

This document contains general information and is not intended to constitute legal or taxation advice. If you need legal or taxation advice, we recommend you speak to a qualified adviser.

Adviser Dale Wicks
Author: Dale Wicks | Manager