At FastSMSF, investing in property within a Self-Managed Super Fund (SMSF) is a strategic way to diversify your fund's portfolio. SMSFs can invest in both residential and commercial (business real) property, but certain rules and structures must be followed.

Residential property investments must follow strict ATO guidelines. SMSFs cannot purchase a residential property from or lease it to a related party. That means neither you nor your relatives can live in or rent the property.

Key Principle: All investments must be made and maintained on an arm's length basis to comply with super laws.

Before investing, the SMSF must be established correctly. If borrowing is involved, a Bare Trust (also known as a Property Custodian Trust) structure is required. Most lenders will also require that both the SMSF and Bare Trust have separate company trustees.

Important Structuring Considerations

Operating Costs and Income: All property-related income (e.g. rent) and expenses (e.g. maintenance, loan repayments) must be paid through the SMSF bank account.

Repairs vs. Improvements: Costs for repairs are deductible, while improvements must be capitalized. Refer to ATO guidelines for clear differentiation.

Borrowing Limits: Loans to SMSFs are typically limited recourse. LVR is generally up to 80% for residential and 70% for commercial properties, subject to lender requirements. Trustee guarantees are often required unless LVR is below 60%.

Signing the Purchase Contract

If Borrowing: The contract must be signed in the name of the Bare Trust Trustee Company. Example: If the trustee is Smith Pty Ltd, then the purchaser should be listed as: Smith Pty Ltd. Do not include the name of your SMSF.

If Not Borrowing: The contract must be in the name of the SMSF trustees. For example:

  • With individual trustees: John Smith and Emma Smith as trustee for the Smith Superannuation Fund
  • With a corporate trustee: Smith Pty Ltd as trustee for the Smith Superannuation Fund

All directors of the trustee company or all individual trustees must sign the purchase contract.

At FastSMSF, we offer complete support to structure your property investment properly. From establishing your SMSF and trustee companies to setting up the Bare Trust, we ensure full compliance with superannuation laws.