Property Investment through a Self Managed Super Fund (SMSF)

I am noticing more and more that borrowing money to purchase property through a Self Managed Super Fund is becoming very popular and is a topic most property investors are interested in learning more about. This is not surprising given there are a growing number of  Australians wanting to take control of their investment decisions so that they can achieve financial freedom in retirement. There are certainly many advantages and potential tax benefits for purchasing property through this structure but there are also many considerations and costs that have to be carefully considered before deciding if this is the right strategy for you. I have been very fortunate to work with many investors that have successfully implemented this strategy through our Mortgage Broking business, Rise High Financial Solutions, as it is an area we specialise in. So I wanted to take this opportunity to point out a few things you should consider before deciding if you want to pursue this investment strategy

Have questions about investing through Super? Click here to talk to one of our experts.

Firstly, Why Invest in Property through a SMSF?


1. Greater control over your superannuation assets

2. Attractive concessional tax structure

3. Using your superannuation as a deposit to purchase property

4. If the rental income and your compulsory superannuation guarantee covers the property expenses then this strategy should not impact your personal cash flow 

Things to watch out for:

1. The cost of setting up a SMSF and ongoing maintenance of it (including record keeping, tax lodgements and annual audits). I suggest you get a finance pre-approval to ensure that you can do what you want to do before you go to the expense of setting up a SMSF

2. Additional Borrowing costs involved

3. Whilst there is no minimum balance required for an SMSF if you are wanting to establish an SMSF for the purpose of purchasing property, you will have to ensure that you at least have sufficient funds in your SMSF (or that you can contribute sufficient funds within the contribution rules) to cover the deposit and purchase costs of the property along with ongoing maintenance of the SMSF. 

4. There are some strict restrictions around the type of property you can buy, for example:

a. The purchase must be an arms length purchase – ie. you can not sell a residential property you already own to your SMSF but may be able to if the property is commercial; 

b. You can not borrow money through SMSF to build an investment property and there are strict rules about the level of repairs, maintenance and improvements that are allowed, so make sure if you are purchasing a property and hoping to add value to it through renovations that you check to ensure you are allowed to do what you want to do before you buy the property

5. You can not access the equity growth to purchase additional properties in the future

6. Most importantly – make sure you get the right advice upfront. There are significant penalties and tax implications if you do not comply with the legislation.


The message I want to leave you with…


SMSF Property Investing can be a great strategy if done properly but it is certainly not for everyone. If you are considering this strategy make sure you get the right advice upfront! 

Have questions about investing through Super? Click here to talk to one of our experts.

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At the tender age of 18, Marissa Schulze already possessed a financial understanding well beyond her years. She saved up her first deposit while still living at home with her parents and bought her first property. Now, 11 years later, her portfolio of 16 properties brings her $3,710 in rent each week; has amassed equity of more than $1.5m. She now runs her own mortgage broker firm in Adelaide, along with her husband and, still at just 30 years of age, she is only getting started.

Top Suburbs : kariong , newtown , st marys , glendenning , leumeah

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  • Craig says on 26/03/2014 07:12:43 PM

    Hi Marissa,

    Wondering if you could provide a bit of advise??

    My wife and I have an SMSF and we would like to invest in residential property but our fund won't stretch that far. We then thought what if our SMSF jointly purchased and investment property with us with the intention to rent it to total strangers.

    So we'd like to know:

    Is this possible?
    Is this complex to setup?
    Is it expensive to manage?

    Many thanks

  • Marissa Schulze says on 31/03/2014 02:50:53 PM

    That’s a great question Craig, but one which really needs to be handled by a Specialist SMSF Adviser, so I have asked Chris Harris, who is the CEO of Exelsuper, SMSF Specialist Advisers to comment on your question, and to provide some useful information.
    Whilst I am sure that the response below will certainly be useful to you, I am more than happy for you to contact me directly at or 0423 794 948 if I can be of any further assistance.
    Using your super to purchase an investment property
    Craig, purchasing a property within a self managed super fund can be simple and easy if handled in the right way. Certainly, using your super as a deposit on an investment property is a credible and useful strategy that has become popular and common over the last couple of years.
    Purchasing a property in an SMSF means that you need a healthy balance in super as you will need to fund 20% of the value of the property that you are looking to acquire, plus the necessary fees, which usually amount to approximately 5-6% of the value of the fund for stamp duty, mortgage fees, establishment of the necessary trust structures (commonly known as bare trusts or custodial trusts which are necessary when using super to buy a property). In short, purchasing a property in SMSF costs approximately $1500 more than if you purchase outside super.
    SMSF Establishment
    Before you consider purchasing the property in super you should be well prepared, by establishing a self managed super fund well in advance, as this can take a while to complete the setup of the fund. Establishment of SMSF costs around $3500. This fee should cover a specialist SMSF adviser taking care of all the setup steps for you. Setting up an SMSF without help can be complex, as it includes having lawyers draw the trust deed, establishing a company to act as the trustee, arranging bank accounts, rollovers, insurance, registering the fund with the ATO and all the other necessary steps to put a self managed super fund in place. Also, before proceeding, it is prudent to seek good advice from a Self Managed Super Specialist adviser, who will detail all the risks and benefits, as well as providing a written Statement of Advice with a detailed analysis of the costs before you leap in. Again. All this should be covered by the fee I’ve mentioned above.
    SMSF Ongoing Costs
    In regard to ongoing costs, all superannuation is expensive to manage. In 2009 the Government’s detailed report into super stated that the average cost of retail and industry super funds is 1.2% per annum, plus the costs of advice, which is usually an additional 1.1% per annum. This means you are probably already paying 2.3% in annual management fees in super. It’s hard to compare SMSF costs to this figure, as the ongoing costs of running an SMSF are fixed flat fees rather than a % based fee, and usually run anywhere from $2,500 upwards.
    Superannuation law says that when you have a self managed super fund you must attend to six things each year for your fund to comply with the law:
    1) Annual Returns
    2) Audit
    3) Records and Book Keeping
    4) Accessing technical and Strategic advice to ensure compliance
    5) Investment Advice
    6) Insurance Advice

    DIY Super versus Self Managed Super Funds
    You local accountant usually quotes around $2,000-3,000 to do the annual returns for SMSF, but this is only one component of the six. This is why they refer to SMSF DIY Super, as you will need to do most of the work to manage your fund yourself, as most accountants are only licensed to do tax work, and cannot provide advice on how to run your fund. Advice can only be provided by a properly accredited and licensed SMSF specialist adviser. Usually to engage such a specialist who can do ALL the work to run your fund costs around $5,000 per annum.

    Owning Property Jointly with your SMSF
    The ownership of a property jointly between a Self Managed Super Fund and a member of the fund may be possible from a Superannuation Legislation point of view, however practicality can impose a couple of issues that usually make ownership by tenants in common a difficult option. In our experience the problems are as follows:

    1) Banks have real difficulty in lending to such a structure, as the loan to the self managed super fund is a Limited Recourse Borrowing arrangement, where securitisation is restricted to the asset being purchased. This means that you will need two loans. One to the SMSF and one personally. This is expensive, complex and most banks won’t do it.
    2) The opportunity to breach superannuation law in such a structure is endless, and fraught with danger. Imagine buying a new set of taps for the bathroom. The taps would need to be paid for proportionately by the owners of the property IE 50/50 by the super fund and 50% by the individual. If they are not, then you may inadvertently breach super laws without even knowing it.
    3) Such a structure would involve legal agreements between the joint owners, which would add significant costs to the transaction.

    Craig, my suggestion is that there are many better ways to purchase property in SMSF by either

    1) Using funds to contribute to super so that the fund has the deposit necessary to purchase the property using a mortgage (limited recourse borrowing arrangement). Usually a super fund needs a 20% deposit plus fees to purchase a property in super, so a fund may have as little as $70-80K. We recommend that SMSF balances should be between $150,000 - $200,000 to make SMSF worthwhile, however each circumstance is different if you are unsure if you have enough, just ask an SMSF expert to advise you.
    2) You may have substantial equity outside of super, which will allow you to be the lender of funds to your super for property purchase. In other words, you borrow the funds in your own name and on lend to your SMSF. This can be an extremely effective method of funding property in super, but requires some thought as to how to best structure such a transaction.
    Craig, has a lot of information that may help you to understand more about SMSF, and particularly to Google “Exelsuper TV” to find some great video’s explaining how this can all work.

  • Sharon says on 17/03/2015 06:13:29 PM

    Hi Marissa,

    I was wondering if you could help me - i am having difficulty finding this information anywhere.

    My husband and I have a SMSF residential investment property and it is being managed by a real estate.
    My question is, my daughter used to work in the real estate industry, as a residential property manager, and we would like
    to assign my daughter as point of contact/emergency contact.

    Is this legal and is this allowed ( of course our investment property will still be managed through the agency, but we would love to take this of our hands and just let our daughter deal with the phone calls, prospective tenants, maintenance request etc)

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