Buying Property with Super: What You Need to Know About SMSFs

Property investment is a powerful wealth-building strategy, but did you know you can also buy property using your superannuation? Through a Self-Managed Super Fund (SMSF), Australians can take control of their retirement savings and invest in residential or commercial property.

While this strategy offers unique benefits, it also comes with strict rules and responsibilities. If you’re considering buying property through your super, here’s what you need to know before you take the next step.

What Is an SMSF?

A Self-Managed Super Fund (SMSF) is a private super fund that you manage yourself, rather than relying on a retail or industry fund. It can have up to four members (or six under certain rules), and each member is typically a trustee, meaning they’re directly responsible for the fund’s decisions and compliance.

Unlike traditional super funds, an SMSF allows you to choose how your retirement savings are invested, including in real estate.

Can You Buy Property with an SMSF?

Yes, but there are important conditions. The Australian Taxation Office (ATO) allows SMSFs to buy investment properties only. These properties must:

• Pass the ‘sole purpose test’ – the property must solely provide retirement benefits for fund members

• Not lived in by any member or related party

• Not to be rented to any member or related party

In other words, you can’t use your SMSF to buy a house for your kids or a holiday home for yourself. However, if structured correctly, this can be a tax-effective way to grow your retirement nest egg.

Residential vs. Commercial Property

An SMSF can invest in either residential or commercial property, but the rules differ:

Residential Property:

• Must be arms-length (no personal use or renting to relatives)

• Purchased solely for investment purposes

Commercial Property:

• Can be leased to your own business (at market rates)

• Popular with business owners who want to control their business premises through their super

Borrowing Through an SMSF

You can use your SMSF to borrow money to purchase a property through a Limited Recourse Borrowing Arrangement (LRBA). This means:

• The loan is secured only against the property (not other SMSF assets)

• The property is held in a separate trust until the loan is repaid

• Lenders may require a larger deposit (typically 30% or more)

• Fewer lenders offer SMSF loans, so rates and terms can vary

Important: Borrowing through an SMSF is complex and requires professional legal, financial, and lending advice.

Tax Benefits of Property in an SMSF

One of the biggest advantages of investing through your SMSF is the tax treatment:

• Rental income is taxed at 15%

• Capital gains on assets held for more than 12 months are taxed at 10%

• In retirement (pension phase), income and capital gains may be tax-free

These tax concessions can significantly boost your long-term returns compared to investing in your name.

Responsibilities and Risks

While buying property through your SMSF can be rewarding, it’s not for everyone. As an SMSF trustee, you must:

• Stay compliant with ATO and superannuation laws

• Develop and follow an investment strategy

• Handle audits, reporting, and annual tax returns

• Cover setup and ongoing administrative costs

Mistakes can be costly, and non-compliance may result in fines or loss of tax benefits.

Is It the Right Strategy for You?

Buying property with your super is best suited for:

• Experienced investors with a larger super balance (ideally $200,000+)

• Business owners seeking to purchase commercial premises

• Those with access to professional advice and a long-term retirement strategy

It’s essential to weigh the benefits against the legal, financial, and administrative responsibilities involved.

Final Thoughts

Using your super to invest in property through an SMSF can be a smart, tax-effective strategy—but it must be done carefully and with the right advice. With the right structure in place, you can take greater control of your retirement wealth while tapping into the long-term power of property.

At DDP, we work with experienced partners to help you explore the possibilities of SMSF property investment. Whether you’re just getting started or ready to take action, we’re here to support your journey with insights, connections, and trusted expertise.

Want to explore if SMSF property investment is right for you?
Contact DDP Real Estate today to start a conversation with our expert team.