SMSFs investing in property

If you are considering buying property using your self-managed super fund it's important you understand the rules relating to SMSFs and property.

Firstly, the property can only be used for providing retirement benefits to the SMSF members otherwise it will breach the sole purpose test. This means you or your relatives cannot live in property owned by your SMSF.

Other rules you will need to consider include:

• Residential property cannot be:

  • purchased by the fund from a member or a related party of a fund member

  • rented by a fund member or any related party of a fund member.

• Commercial property that is used solely for business purposes can be:

  • acquired by the fund from a member or a related party, providing the acquisition is at market value. If the trustees are not able to show evidence that their property is used solely for business purposes or is reported at market value in the financial statements this is a breach of the super laws

  • leased at market value to a fund member or related parties of a fund member.

If you're the trustee of an SMSF that is looking to invest in property, you should ensure the investment complies with the super laws. Where the super laws are breached, penalties can apply and you may be disqualified as a trustee and lose the ability to operate your SMSF.