How to buy a property through your SMSF

September 18, 2023 Catherine Salat

If you run a self-managed superannuation fund (SMSF), you might have considered investing in property.

Buying a property through a SMSF has several major benefits, including:

1. You’re building a passive income stream

When you buy a property through your SMSF, you can’t live in it. But you can rent it out so that it generates a steady income stream into your retirement fund.

2. You could realise long-term growth

History tells us that Australian property can be a sound investment with values growing over the long term.

For example, research by CoreLogic showed that for the 30 years to July 2022, national dwelling values increased by 382% as follows:

  • 77% during 1992-2002
  • 59% during 2002-2012
  • 72% during 2012-2022

Questions to ask an SMSF accountant

There are potential tax considerations when you buy property through an SMSF.

Here are some questions you can discuss with an accountant to get a better understanding of how they might apply to your specific situation:

  • How does the SMSF’s tax rate compare to my personal tax rate?
  • How does owning a property in an SMSF affect the tax treatment of rental income?
  • What are the capital gains tax implications if the SMSF decides to sell the property in the future?
  • How does the tax treatment differ if the SMSF property is sold during the accumulation phase versus the pension phase?
  • Are there any limitations on claiming tax deductions for an SMSF property investment?

The drawbacks of buying a property into a SMSF

There are several reasons you might not want to buy a property in your SMSF, including:

  • Investing in an SMSF property can be complicated with strict rules to follow (and big penalties for non-compliance).
  • You generally can’t borrow to build or improve the property
  • You could be putting all your eggs in one basket


If you choose to buy a residential property, the property must meet the following conditions:

  1. The property cannot be bought from the trustee, or anyone related to the trustee.
  2. A trustee or anyone related to the trustee cannot rent or live in the residence.
  3. The property must be used for the sole purpose of generating retirement income for the SMSF members.

An SMSF may also buy a commercial property. Unlike residential property, a business owner may buy a commercial property in its SMSF and lease the property back to its business if it strictly follows these rules:

  • All the transactions must be concluded at arm’s length and reflect true market values
  • The terms must be commercially competitive
  • The property must be regularly valued to ensure the rent is market-related
  • The business must pay the rent on time and in full

Obtaining finance

If your SMSF needs finance to buy a property, it will enter a limited recourse borrowing arrangement (LRBA) with a lender. In other words, the lender’s security is limited to the property, and it cannot attach any other assets owned by the SMSF if there’s a default.

Lenders that offer LBRAs may have different paperwork requirements but, in general, you’d need to show:

  • The SMSF is stable and can afford the loan repayments
  • The SMSF can afford any shortfalls between the rental income and expenses like mortgage repayments, insurance, rates and property management fees
  • There is a strategy in place to repay the loan in the case of illness, disability or death of the trustee
  • There is sufficient cash flow for lump-sum withdrawals or pension payouts, if applicable

SMSF lending is a very specialised area, with hefty penalties for getting things wrong. As a result, it’s strongly recommended you work with an experienced mortgage broker, like Just Imagine Finance, to guide you through the process.

If you want to buy a property for your SMSF, Just Imagine Finance can help. To discuss your scenario, email or phone 0414 673 359.