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SMSFs and property: 4 do’s and don’ts


Are you investing in property through your self-managed super fund (SMSF)? Make sure you know what you can and can't do with this sometimes-complex retirement scheme. Check out these four do's and don'ts when it comes to property and your SMSF.

Property and your SMSF can stand hand in hand - if you follow the rules.Property and your SMSF can stand hand in hand – if you follow the rules.

Do: Get your family involved

The great thing about an SMSF is that it isn't just a one-person deal. You can have up to four people in the structure – just the right size for a family. Investing in property may build plenty of wealth for your retirement, but it can also be an expensive venture. By pooling the capital of multiple people, it may be easier to get the required deposit down for a mortgage (yes, you can borrow through an SMSF too), and if successful, you'll be helping your family build wealth for their eventual retirement too.

Don't: Let your family live in the property

Any property that is purchased through an SMSF must not be rented to or acquired from any relative of any member of the trust, or the members themselves. Further, you can't let them live there rent-free either. SMSFs have to pass a "sole purpose" test – that is, they are only used to provide retirement funds for members of the trust. That means you can't use the properties yourselves at any time.

Do: Maintain your legal documentation

You can't use the properties yourselves at any time.

The Australian Securities and Investments Commission estimates that there is over $1.2 billion worth of unclaimed cash from bank accounts, shares and life insurance policies across Australia. Don't let your super fall into this communal pot by ensuring that you have your legal documentation intact for when you claim your capital in retirement. Make sure you speak to a qualified, experienced advisor to ensure that you are operating your SMSF in the right way to avoid losing out on your hard work.

Don't: Try to improve it

When you purchase a property through an SMSF, you cannot improve it in terms of renovations and additions. No extra floors, no conservatories, nothing like that. However, you can maintain and repair it. Archicentre estimates that up to 34 per cent of homes in Australia suffer from minor water damage, and a further 4 per cent have major issues that could cost more than $10,000 to repair. Make sure to maintain your asset without improving it significantly to ensure that you don't fall foul of the super laws as the penalties can be costly. 

Need a hand with your SMSF? Make sure you get in touch with your local financial expert at Eclipse Financial Services. We can help you turn that complex trust into the tax-efficient, money-making machine it should be.

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