Things to Know About Investing in Property through Your SMSF

A growing number of Australians have invested in property through a Self Managed Super Fund (SMSF). Owning property through a SMSF can be a tax effective way to build wealth and plan for retirement. However, it is important to be aware of the rules and regulations that apply to SMSF property. The government website MoneySmart provided some need-to-know basics:

Rules

The property must comply with the sole purpose test, which is that the SMSF must be managed for the sole purpose of providing retirement funds to SMSF members. Another rule is the arm’s length rule, which stipulates that the property (and other fund investments) must be purchased and maintained on a commercial basis.

Fees and Charges

SMSF property investing will involve certain fees and charges. These include stamp duty, bank fees, property management fees, legal fees, and other costs.

Other Considerations

Note that SMSF borrowing arrangements are subject to rules. Borrowing can only be the form of a ‘limited recourse borrowing arrangement’ and the loan can only be used to buy a single acquirable asset, or one property (or a collection of the same type of shares). Additionally, note that renovations or alterations that change the character of the property are generally not permitted until the loan is paid off.