How to use your super for property investment

By Ericka Pingol | 10 Feb 2020

Getting into the property investment scene takes more than just skills, experience and education —you also need some start-up money. If you don’t have adequate savings, did you know that your superannuation could be the key for you to enter the property market?

Before we break down how you could use your super to invest, let’s define what superannuation is and what it’s supposed to do:

Superannuation is money put aside by your employer over your working life for your retirement. It is sent to a managed fund where your money is pooled with other members’ money and then invested on your behalf by professional investment managers, according to the Australian Securities and Investments Commission (ASIC).

Usually, there are three types of super contributions—employer contributions, personal contributions, and government contributions.

  • Employer super contributions. In this type of contribution, your employer pays an amount equal to 9.5% of your salary into your super fund account. This is on top of your salary or wages. These contributions accumulate and invested by your super fund so you will earn investment returns.

If you are self-employed, you are responsible for making your own contributions, but they are tax-deductible. If you already have a super fund from being employed previously, check with your fund that you can continue to make personal contributions while self-employed.

For more information about super contributions for self-employed individuals, visit the ASIC website.

  • Personal super contributions. You can make extra contributions by:
  1. Salary sacrificing. Your employer may direct some of your pre-tax into your super. This will be deducted by your employer and sent to the fund with your employer super contributions.
  2. Personal contributions from your pay. Ask your employer to make personal contributions from money you have paid on tax. If you are a lower income earner, you are entitled to government co-contributions.
  3. Bank transfer. You may transfer some of your money into your super account using BPay or direct deposit.
  4. Super transfer. Transferring all or some of your super from another fund into your main super account.
  • Government contributions. You may receive a government co-contribution if you put your own after-tax money into super. However, this depends on how much money you earn. Lower-income earners may be able to receive up to an extra $500 by making personal after-tax contributions.

Where your super money goes

The money you put into your super fund account is invested by your super fund. Most super funds offer various investment options, including pre-mixed options containing a mix of different asset classes and sector options like cash, property, and shares.

Your returns may affect how quickly your super grows. Choosing an investment option that fits your investment timeframe is essential.

If you retire and have reached your preservation age—the age when you can withdraw your super, you may be able to access your super.

Here’s when you can access your super, according to when you were born:

Date of birth

Preservation age

Before 1 July 1960


1 July 1960 - 30 June 1961


1 July 1961 - 30 June 1962


1 July 1961 - 30 June 1962


1 July 1963 - 30 June 1964


From 1 July 1964


For more information about accessing your super, visit this resource.

Self-managed super fund and property investment

A self-managed super fund (SMSF) is a saving account for your retirement that you manage on your own, instead of being managed by a super provider. It may allow you to be more involved with what you invest in. It may also give you some tax benefits, as superannuation income is taxed at 15% and superannuation capital gains are taxed at 10%.

You can use SMSF for property investment. Property investment via SMSFs gives control back to consumers and potentially increases their retirement funds above and beyond the projections needed, according to Jason Paetow, managing director of AllianceCorp.

Interested investors may be able to maximise their returns by salary sacrificing. Combining super with a family member may also increase their purchasing power.

“When purchasing property through an SMSF, individuals can secure finance of up to 70% of the property value, provided they meet the lender criteria. This means they only need to invest a small amount of their funds in the property,” Paetow explained.

Purchasing property through SMSF

Some of the steps you may want to consider taking when buying an investment property using your self-managed super fund are:

  • Establishing the SMSF trust and trust deed
  • Setting up the corporate fund trustee structure
  • Registering the fund the Australian Taxation Office (ATO)—provide TFN and ABN
  • Setting up the fund bank account
  • Rolling in of existing super monies or balances
  • Ensuring your employer contributions are transferred to SMSF
  • Organising the ATO SMSF messaging provider so the fund can receive employer contributions
  • Establishing a limited recourse borrowing arrangement (LRBA) for direct property
  • Investment—provide statement of advice (SOA)

Rules and costs

Some rules you have to know before using your SMSF for property investment includes:

  • The property cannot be your principal place of residence
  • The purchase of land for the development of a house and land package, as well as traditional development – where you settle on the land first – are not allowed
  • The property must not be acquired from a related party of a member
  • The property must meet the 'sole purpose test' of solely providing retirement benefits to fund members

Buying property for investment using your SMSF may also cost you some fees. Some of these are:

  • Upfront fees
  • Legal fees
  • Advice fees
  • Stamp duty
  • Ongoing property management fees
  • Bank fees

Keep in mind that as with other property investing strategies, using your SMSF for property investment involves some risks such as negative cash flow, lack of portfolio diversity, underperforming properties, and financing costs.

“As with any investment, fluctuations and their impact on after-tax cash flow all need to be considered. Additionally, not everyone has a background in finance and tax, so the administration of establishing an SMSF and the legalities of remaining compliant can be challenging,” Paetow said.

Ask an expert for advice about using your SMSF for property investment, they may be able to guide you to the right path to maximise your returns using your fund.

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