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SMSF Investing in Australia

Investing In Property Through a Self-Managed Super Fund

Self-Managed Super Fund Quick Facts

By mid-2025, there will be more than 700,000 self-managed super funds (SMSFs) operating in Australia. This figure reflects the ongoing growth of SMSF investing.

SMSFs play a significant role in the property market, particularly in acquiring residential and commercial properties as part of their investment strategies.

Investing in property through a self managed super fund offers a range of potential tax benefits, making it an attractive option for long-term wealth accumulation.

Positive Income Properties can help diversify an SMSF investment strategy through house and land packages, NDIS SDA properties and fractional property investment.

A Guide to Buying Property Through Self-Managed Super Funds

Buying a property through SMSF investing has become increasingly popular in Australia. This has particularly been the case since it became possible for SMSFs to borrow money to finance a direct property purchase.

While property investment through a self managed super fund has certain advantages, it also has some strict rules that must be adhered to. Anyone considering buying an SMSF property investment should make sure they’re familiar with the rules and potential tax implications.

What Is A Self Managed Super Fund?

A Self managed super fund is a type of superannuation fund that you manage yourself. Unlike traditional fund structures that are classed as industry or retail, an SMSF gives the individual complete control over superannuation and retirement savings. Individuals make investment decisions on how superannuation money is invested and this can include a diverse range of assets such as property – like we discuss on this webpage – shares, bonds and cash. Strategic investment, such as savvy property investing, can lead to potentially higher returns over the life of your portfolio.

How Can Positive Income Properties Help with SMSF Investing?

At Positive Income Properties, we’re committed to sourcing the right property deal to suit the needs of each individual client. We are a full-service business that helps you establish your goals, aspirations and budget right at the start and we only stop when we’ve delivered your new property with professional property management and reliable tenants in place.

If you’re considering buying an investment property through a self-managed super fund, then Positive Income Properties is the ideal choice.

What are the benefits of working with Positive Income Properties to secure your SMSF property? Traditionally, purchasing options for SMSF-owned real estate have been somewhat limited to pre-existing residential and commercial properties. Now, thanks to Positive Income Properties, you can use your SMSF to buy a wide range of investment properties.

Use Positive Income Properties to maximise the true potential of your superannuation investments and secure your financial future.

What Are Your Options for SMSF Investing?

Positive Income Properties provides a wide range of purchasing options that are tailored to the specific needs of SMSF property investors. This allows us to facilitate a variety of different SMSF investment strategy property purchases, including:

Residential investment properties (such as dual key, co-living, duplex or house and land packages)
NDIS Specialist Disability Accommodation
Fractional property investment

Thanks to Positive Income Properties, self-managed super fund investors can more easily diversify their property portfolios and mitigate market risks.

How is this possible? Contact Positive Income Properties to find out more.

Buy Residential Investment Properties with an SMSF

It is now possible to purchase a wide range of residential investment properties with an SMSF. As part of anSMSF investment strategy, these include:

Dual key properties
Duplex homes
Co-living and shared living housing
House and land packages

When buying property through self managed super funds, investors have typically been restricted from entering two-part contracts. Because of this limitation, it has been almost impossible for SMSFs to purchase house and land packages and build brand new homes that are tailored to their investment needs. But not anymore.

Positive Income Properties now offer investors the opportunity to buy a brand new home through their SMSF. We can do this by entering directly into a two-part contract with the developer and builder on your behalf. We can then offer investors a one-part contract of sale that enables them to purchase the property through Positive Income Properties.

Fractional Property Investment Through SMSF Investing

Fractional property investment allows multiple investors to co-own a property through a dedicated platform or trust. Instead of buying a property outright, each investor purchases a share or fraction, enabling several individuals to collectively own and profit from the property.

Fractional property investment offers a great range of potential benefits, including:

It makes it easier for people to enter the real estate market with smaller investments.
allows for greater portfolio diversity (since you can invest in a variety of property types in a range of different areas).
It enables investors to benefit from partial ownership of high-yield properties, such as inner-city developments or multi-million dollar residential properties.

Positive Income Properties can assist self-managed super fund investors with nationwide fractional property investments.

NDIS Specialist Disability Accommodation Investments

NDIS Specialist Disability Accommodation (SDA) are properties that are specifically designed to help Australians living with disabilities enjoy a greater level of independence. Demand for these customised properties continues to expand, with an annual growth rate of 36% over the past few years. With a long-term commitment for government funding, NDIS SDA properties offer investors the chance to benefit from a growing market while also having a positive social impact.

Positive Income Properties can assist with SMSF investing in properties that meet the strict requirements of the NDIS SDA Design Standard. Our team can handle all aspects of the purchase, from sourcing suitable properties right through to leasing the property post-settlement.

What are the Benefits of Using PIP for SMSF Investing?

Positive Income Properties can streamline and enhance your SMSF property investment experience by providing a range of benefits tailored to your unique needs. We do this by presenting:

Diverse Opportunities

We can provide access to a diverse range of investment opportunities, allowing for greater portfolio diversification.

A Simplified Process

We can simplify the complex process of SMSF investing, making it easier for owners to enter a lucrative market.

Innovative Solutions

We work with bespoke financial brokers, solicitors, valuers and builders across Australia who are engaged in locations we have selected as the best fit for purpose property.

Our commitment to personalised service ensures that every property is aligned with the long-term financial goals of each investor, providing peace of mind and a secure path to wealth accumulation.

SMSF Regulations for Investing in Residential Property

Property purchased through an SMSF cannot be lived in by any trustee of the SMSF or anyone related to the trustees. This regulation applies no matter how distant the relationship might be. In other words, you can’t buy a property through a self-managed super fund and then live in it with your family.

An SMSF investment property also cannot be rented by any of the trustees or anyone related to the trustees. This means that you can’t buy a holiday rental property with an SMSF and then hire it out for personal use.

SMSF property investment rules also stipulate that you cannot put an existing residential investment property that you already own into an SMSF. This applies regardless of whether the SMSF is purchasing the property at market value or contributing to it within the cap limits.

The Tax Consequences of Buying and Renting Property

If you buy a property through an SMSF, the fund will be required to pay a 15% tax on any rental income received from the property. On properties held for longer than 12 months, the fund will receive a discount on any capital gains it makes upon sale. This discount will bring any capital gains tax liability down to 10%.

If the property is purchased via a loan, the interest payments are tax-deductible to the fund. If property expenses exceed the rental income, then this counts as a taxable loss that is carried forward each year and can be offset on future taxable income.

Once trustees start receiving a pension at retirement, any rental income or capital gains arising from the fund will be tax-free.

It’s also important to note that if you make a loss on your property this cannot be offset against your personal taxable income outside the fund.

Franking Credits and SMSF Property Benefits

Franking credits are tax credits attached to dividends paid by Australian companies. When an SMSF receives a fully franked dividend from an Australian company, it can claim a tax credit against its tax liability. This effectively reduces the overall tax burden on the SMSF’s income.

While franking credits are primarily associated with shares, they can indirectly benefit an SMSF investment strategy that is using property income as part of the superannuation portfolio. For instance, if an SMSF invests in a listed property trust (LPT), it may receive fully franked dividends. These dividends can then be used to offset the SMSF’s tax liability on property income.

What Are the Rules for Buying Property Through an SMSF?

In order to purchase a property through a self-managed super fund, you’ll need to make sure you’re complying with certain rules. The main rules are:

Sole Purpose Test

The property must be purchased with the sole purpose of supplying retirement benefits to members of the super fund. This is what’s known as the ‘sole purpose test’.

Best Interests of Members

All property purchases must be in the best financial interests of the SMSF members.

Buying from a Related Party

A related party transaction occurs when an SMSF deals with a person or entity closely connected to a fund member or trustee. Such transactions are generally prohibited, unless they meet specific conditions. Examples of related party transactions include:

Purchasing property from a family member or close friend
Selling property to a family member or close friend
Renting property to a family member or close friend

Usage by Members or Related Parties

The property cannot be lived in or rented by any of the SMSF members or any of their related parties. One exception to this rule is for commercial properties, which can be leased by a trustee or related party for business purposes. However, the property must be rented at the current market rate (no family discounts) and must comply with specific rules outlined by the Australian Tax Office (ATO).

True Market Value

Properties purchased by an SMSF must reflect the true market value of the asset. Additionally, investment properties must be rented out at the current market value.

Arm's Length Transactions

An arm’s length transaction is a deal between two parties who are independent and act in their own best interests. In the context of SMSF property purchases, this means that the property must be purchased at market value, without any preferential treatment or discounts.

For more information on the specific rules that apply to purchasing a property through an SMSF, visit the ATO website.

Make Sure You Consider Additional Costs

Before making any significant purchase it’s important to factor in all of the potential costs. Buying a property through a self-managed super fund can involve additional fees and charges when compared to a traditional property sale. This could include:

Upfront costs such as establishment fees, trustee company fees, loan application fees, property evaluation costs and Lender’s Mortgage Insurance (LMI).
Legal fees, including conveyancing costs.
Professional advice fees.
Property inspection costs.
Stamp duty costs.
Ongoing property management fees.

These added costs will have an impact on your super balance, so it’s worth obtaining independent expert advice regarding potential costs.

Keep in mind that professional SMSF advice can only be provided by those with an Australian Financial Services (AFS) licence. To confirm whether or not a person is licensed to dispense this information, consult the ASIC Connect Professional Register.

Obtaining a Loan for an SMSF Property Purchase

Obtaining a loan for an SMSF property purchase has become easier in recent years but it’s still subject to strict lending criteria. In particular, the loan must be in the form of a ‘Limited Recourse Borrowing Arrangement’ (LRBA).

With an LRBA, the property acts as security for the loan. If the SMSF defaults on repayments, then the lender’s options for recovering funds are limited to the property itself. The LRBA protects any other assets that are owned by the SMSF, ensuring the lender has no legal right to try and seize them.

Does your SMSF already contain the necessary funds to purchase an investment property? If so, you’ll be able to sidestep a lot of the paperwork and some of the costs associated with an SMSF investment property purchase.

Fixed vs. Variable Interest Rates

Fixed Interest Rate: Offers certainty about repayments over a fixed period. It can be beneficial in a rising interest rate environment.

Variable Interest Rate: Fluctuates with market interest rates. It can be advantageous in a falling interest rate environment.

Assess the Risks

With any kind of investment property purchase, it’s important to assess potential risks and see if they’re consistent with your preferred investment strategy.

If you’ll need a home loan to fund an SMSF property purchase, then some of the potential risks include:

Increased Costs

An LRBA loan may attract higher fees and interest rates than a traditional mortgage.

Cash Flow Limitations

You will be required to make loan repayments directly from your SMSF. This means you won’t be able to top up payments from a personal account if your SMSF funds are tied up in other investments. To avoid late payments or even defaulting on the loan, you’ll need to ensure your SMSF always has sufficient cash flow to meet the minimum repayments.

Difficult to Unwind

It can be extremely difficult to make changes to an LRBA once it’s in place. If the initial loan and contract aren’t set up correctly, your only option may be to stick with an unsuitable arrangement or to sell the property (which could cause significant financial losses).

Tax Considerations

Tax losses from an SMSF investment property can’t be used to offset personal income taxes. This means that you could miss out on potential tax offsets when using an SMSF to buy your investment property.

No Renovations

You will be limited from making significant changes to the property until your SMSF loan is repaid in full.

For more information about the potential risks, contact the expert team at Positive Income Properties today.

SMSF vs. Traditional Investments

	SMSF vs. Traditional Investments	Traditional Investments
Control	Complete control over investment decisions	Limited control, often reliant on fund managers
Tax Benefits	Tax-deferred growth, potential tax offsets	Generally subject to higher taxes
Diversification	Ability to invest in a wide range of assets, including property	Often limited to a narrower range of asset classes
Potential Returns	Potential for higher returns through strategic property investment	Potential for lower returns due to fees and management costs
Leverage	Can use leverage through LRBAs to amplify returns	Limited leverage options

Other Things to Consider

What else should you consider when purchasing an investment property through an SMSF?

Sales tactics from property developers can be aggressive. Be on guard if a developer is promoting an SMSF investment with competitions or perks such as free flights/meals.
Remember to seek expert independent advice if you’re feeling pressured to make a purchase decision.
If you’re unfamiliar with a property market, then take time to do thorough research before making a decision.

Ensure anyone offering you financial advice on an SMSF property purchase is fully licensed.

Exit Strategies for SMSF Property

While the primary focus of SMSF property investment is long-term growth and income generation, it’s important to consider potential exit strategies. Here are a few high-level options:

Selling the Property: This involves selling the property on the open market and transferring the proceeds back into the SMSF.

In-specie Transfer: Transferring the property to a member’s personal name upon retirement, subject to specific tax rules.

Rollover to Another Fund: Transferring the property to another super fund, such as an industry fund or retail fund.

Note: It’s crucial to seek professional advice to understand the specific tax implications and legal requirements associated with each exit strategy.

Enhance Your SMSF Investments with Positive Income Properties

At Positive Income Properties, our mission is to find the perfect property deals tailored to each client’s unique requirements. We offer a diverse selection of investment properties ideal for those managing their own super funds.

Our experienced team is ready to support you through every phase of SMSF investing. From property selection and financing through to settlement and leasing, we ensure a seamless process. Our specialty lies in providing secured tenancies, guaranteeing investors a reliable income stream right from settlement. With a rental guarantee, you won’t have to worry about extended vacancies, missed rent payments or excessive property management fees.

Discover the advantages of SMSF investing with Positive Income Properties. Contact us today to learn more.

Available SMSF Stock

Positive Income Properties currently has a great range of SMSF stock located across various Queensland property markets. Our properties include house and land packages, dual key and custom-built homes suitable for NDIS Specialist Disability Accommodation.