SMSF Property Investment: Advice for Trustees in Sydney
SMSF property investment can be a sound way to build retirement wealth, but the rules are strict and mistakes are costly. Quantum House helps trustees structure, fund and report on property in a self-managed super fund. As a result, the investment delivers its benefits without putting the fund’s compliance at risk.
The key rules trustees must follow
- The property must meet the sole purpose test, which means it is held to provide retirement benefits.
- Generally, the fund cannot buy residential property from a related party. Members and their relatives also cannot live in it or rent it.
- However, the fund can buy business real property, such as commercial premises, from a related party at market value. It can then lease it to a related business at market rent.
- The fund must value the property at market value each year for its financial statements.
Borrowing to buy property in an SMSF
An SMSF can borrow to buy property in the fund through a limited recourse borrowing arrangement. In that case, a separate holding trust holds the property, and the lender can only claim against that asset. However, the fund generally cannot use borrowed money to improve the property. The trustees must also document the arrangement correctly from the start. For this reason, we review the structure before you sign contracts.
How we help with SMSF property investment
We help trustees check whether property suits their fund, set up the right structure, and keep the records the auditor needs each year. In addition, we work alongside licensed financial advisers and lenders, so each part of the transaction fits together. Our SMSF accounting service then handles the ongoing compliance, and our article on the rules for property in an SMSF explains the main issues in more detail. The ATO also sets out the obligations of SMSF trustees.
To discuss SMSF property investment, contact our team.