Using Your SMSF for Property Development or Investment: Strategies for Smart Structuring
A common question we hear is ‘How can I access the cash in my super fund?’
The typical response? Not until you're older, possibly greying, and perhaps more interested in bingo than property deals.
But let’s challenge that thinking—there are strategic (and legal!) ways to make your Self-Managed Super Fund (SMSF) work for you before retirement. One of the most popular options? Property.
Property with an SMSF: The Basics
Many business owners, developers and investors use their SMSF to acquire property—especially commercial property—as a way to build wealth and secure business premises. With potential tax advantages and the ability to leverage, purchasing property through your SMSF could be a smart financial move.
However, before you start picking out office décor, you’ll need to comply with the Superannuation Industry (Supervision) Act (SIS Act) and other regulations. Structuring the purchase correctly is key to staying on the right side of the Taxman.
1. SMSF Property Acquisition via a Unit Trust
This is a common approach, especially for property developers keen to unlock super cash.
Here’s how it works:
✔️ Your SMSF loans funds to a Unit Trust or acquires the units in the trust.
✔️ The Unit Trust buys the property and can borrow additional funds from a bank if needed.
Benefits:
• Greater flexibility – options to develop not just hold property
• Easier financing compared to Limited Recourse Borrowing Arrangements (LRBA).
• Potential tax efficiencies.
⚠️ Key Considerations:
• The SMSF cannot control the Unit Trust. Control typically means more than 50% (so, no, you can’t be the boss of everything).
• If you’re co-investing with related parties (spouse, family members, etc.), you may fail the control test. The ATO doesn’t like it when family barbecues turn into board meetings.
2. Limited Recourse Borrowing Arrangement (LRBA)
If your SMSF doesn’t have enough funds to buy property outright (which is most of us), borrowing through an LRBA might be the way to go.
✔️ The SMSF sets up a separate bare trust (a holding trust with a fancy name).
✔️ The bare trust holds the property on behalf of the SMSF
✔️ The SMSF takes out a loan (from a bank) to buy the property
✔️ Loan repayments come from SMSF contributions and rental income
Benefits:
• Helps SMSFs acquire property with limited funds
• Provides a clear legal structure to keep the ATO happy
• Once the loan is repaid, the property is fully owned by the SMSF
⚠️ Key Considerations:
• The loan must be limited recourse (meaning the lender can only go after the property, not other SMSF assets)
• Strict rules apply, including restrictions on renovations while the loan is in place.
3. Business Real Property Strategy (Leasing to Your Own Business)
If you run a business, your SMSF can buy a commercial property and lease it back to you. Essentially, you become your own landlord (and hopefully, a good one!).
✔️ The SMSF buys the commercial property
✔️ The SMSF leases the property to your business at market rates
✔️ Rent payments go directly into your SMSF, growing your retirement savings.
Benefits:
• Rental payments stay within your wealth ecosystem instead of going to some other landlord’s yacht fund
• Your business secures stable premises
• Potential tax advantages (hello, concessional tax rates!)
⚠️ Key Considerations:
• The property must be commercial (so no, your SMSF can’t buy you a beach house—sad, we know).
• Rent must be at market value (the ATO isn’t a fan of “mates rates”).
4. Co-Investing in Property with Related Parties
If your SMSF doesn’t have enough capital to go solo on a property purchase, a co-investment strategy might work.
✔️ Your SMSF and another entity (you personally, your business, or a family trust) buy the property together.
✔️ Ownership is split based on contributions (e.g., SMSF owns 60%, you personally own 40%)
✔️ Rental income and expenses are split proportionally.
Benefits:
• Access to higher-value properties with shared ownership
• More flexibility than sole SMSF ownership
• Can be tailored to suit different financial needs
⚠️ Key Considerations:
• Must comply with non-arm’s length income (NALI) rules—otherwise, expect some hefty tax penalties
• Related-party transactions must be structured carefully to comply with SIS Act regulations (yes, paperwork is involved)
• No debt allowed
Is SMSF Property Investment Right for You?
Investing in property through your SMSF can be a great wealth-building strategy, but it’s not a “set and forget” deal. Consider:
✅ Your SMSF’s financial position – Got enough funds to play with?
✅ Your long-term investment strategy – Does property fit your retirement goals?
✅ Compliance and legal factors – The ATO loves rules, and you need to follow them.
✅ The right professional advice – A tax accountant, and financial planner can help ensure you don’t accidentally fund your dream beach house instead of your retirement.
As always, this is general advice—chat with us before making any moves.
Get in touch with m+h Private today on +61 3036 7174 to see how we can help deliver the best support to you and your business
As always, the above is general in nature, please discuss with your trusted advisor.