SMSF Property
SMSF Property Services
Investing in property through a self-managed superfund (SMSF) can be a powerful way to grow your retirement savings. With benefits like tax efficiency and control, an SMSF investment property is an attractive option for many Australians.
However, SMSF property loans and purchases come with strict rules and responsibilities. At Rise Accountants, we help trustees navigate the complexities of SMSF property investments, ensuring compliance and financial success.
Read on to discover how we manage SMSF property compliance matters, SMSF tax returns and more for our SMSF clients.
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"Ash, Tyler and Korey have been fantastic in helping us both with our personal and SMSF accounting. Love everything being via digital service - but if you have a question, they're more than happy to jump on the phone to have a chat. Cannot recommend them highly enough! Thanks team."
Alicia
How does an SMSF buy property?
An SMSF can purchase property, but it must meet the Self Managed Super Fund Rules set by the ATO. Here’s what you need to know:
Eligible Properties
SMSFs can purchase residential or commercial property, but there are restrictions:
Residential Property
Must not be leased to or used by a member or a related party.
Commercial Property
Can be leased to a related party if at market rates and compliant with SMSF Rules.
SMSF Loans
SMSFs can use SMSF property loans, such as Limited Recourse Borrowing Arrangements (LRBAs), to fund property purchases. These loans:
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Are secured only against the property purchased, limiting fund liability.
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Cannot be used for improvements, only for acquiring the property.
Tax Advantages
Rental income is taxed at the concessional SMSF tax rate of 15% in the accumulation phase, and capital gains may be tax-free in the pension phase.
Stamp Duty and Selling
SMSFs generally pay stamp duty when purchasing property, although exemptions may apply for certain transactions.
Selling a property to or from an SMSF must comply with arm’s length rules.
Key rules for SMSF property investments
1. Sole Purpose Test
The property must solely support the retirement benefits of the fund's members. Personal use or leasing to related parties (for residential property) is prohibited.
2. Borrowing Restrictions
SMSFs can borrow to purchase property through an LRBA. These loans are subject to strict conditions and can only be used for acquiring a single acquirable asset.
3. Arm’s Length Transactions
All dealings must be at market value and conducted at arm’s length. This includes purchase price, rental income, and property management costs.
4. Maintenance and Improvements
Funds borrowed through an LRBA cannot be used for property improvements or renovations. Maintenance, however, can be funded directly by the SMSF.
5. Diversification and Liquidity
Trustees must ensure that the property investment aligns with the SMSF’s investment strategy, considering diversification, liquidity, and risk management.
How ultimately to live in your SMSF property
You can reside in an SMSF property, but only when you retire.
In addition, you must meet several other conditions required by the Australian Tax Office (ATO) including an in-specie transfer and the sole purpose test.
Contact us for a confidential, no obligation discussion.
Common questions about SMSF property
Can I or my relatives live in my SMSF property?
No, living in an SMSF property is prohibited. There are penalties for living in an SMSF property, even temporarily.
Can I AirBnB my SMSF property?
Short-term rentals like Airbnb may be allowed so long as the property is not used by a related party.
Can I live in my SMSF property when I retire?
Yes, you may be able to live in your SMSF property once it has been transferred out of the SMSF and into your name, typically after retirement.
Do SMSFs pay stamp duty on property purchases?
Yes, SMSFs generally pay stamp duty unless an exemption applies.
Can I sell property from my SMSF to myself?
Selling a property from your SMSF to yourself must meet strict compliance rules and may have tax implications.
Can SMSFs invest in private companies?
SMSFs can invest in private companies under specific conditions, provided the investment complies with diversification and arm’s length rules.
How does an SMSF manage cash flow for property investments?
Trustees must carefully manage cash flow to cover property expenses, such as mortgage repayments, maintenance costs, and insurance. Failure to maintain sufficient liquidity could lead to compliance breaches.
Can an SMSF buy property with other investors?
Yes, an SMSF can co-invest in property with other SMSFs or individuals through a tenants-in-common arrangement. However, this setup requires detailed agreements and strict adherence to arm’s length rules.
What happens if my SMSF cannot meet its loan repayments?
If your SMSF cannot meet loan repayments, the lender’s recourse is limited to the property purchased under the LRBA. However, this could still significantly impact your fund’s financial health and compliance.
How can Rise Accountants help with SMSF property investments
At Rise Accountants, we offer comprehensive support for SMSF property purchases and management. Our Brisbane-based team of SMSF accountants ensures your fund complies with all ATO regulations, while maximising the benefits of property investment.
SMSF Property Services
Our SMSF property services by our team of Certified Practising Accountants include:
SMSF Setup
Helping establish the super fund and Bare Trust (LRBA) while coordinating with financial planners and lenders to streamline the process.
Investment Strategy
Referrals to trusted financial planners to ensure your property investment aligns with your SMSF strategy and complies with SMSF Rules.
Borrowing Assistance
Guidance on Limited Recourse Borrowing Arrangements (LRBAs) and SMSF mortgage options.
Tax Optimisation
Expert advice on SMSF tax, including SMSF capital gains tax and rental income strategies.
Compliance Management
Managing SMSF administration, including audits, tax returns, and reporting requirements.
Collaboration with Property Experts
Partnering with trusted property managers and lenders to ensure you achieve the best return on investment.
Why choose Rise Accountants for your SMSF accounting?
With years of experience in SMSF accounting services, we’re your trusted partner for all aspects of SMSF property investments. From setting up SMSF to managing audits and SMSF tax compliance, our team of CPAs and SMSF accounting specialists are here to help.
Contact us today for SMSF services
Thinking about investing in property through your SMSF? Rise Accountants provides tailored support to ensure your property investment aligns with your fund’s goals and complies with all regulations.
Contact us today to learn how we can help you make the most of your SMSF property investments or book a free 15 minute Discovery Call.
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Read more in our Complete Guide to
Australian Self Managed Super Funds
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