Self-Managed Superannuation Fund for your Property Investment in 2020

February 14, 2020
SMSF for your property investment in 2020

Chris Skurrie from C&M Property Partners gives you the rundown on using Self-Managed Superannuation Fund (SMSF) to make your property investment. Join us at Soho to find property and learn more from amazing property minds like Chris.

It is becoming increasingly popular to use a SMSF to purchase an investment property. An SMSF is one that is managed by yourself instead of a superannuation provider, empowering you to have more choices over what happens to the fund. First-home owners (FHOs) might be excited to know that they have this fund option to rely on when investing into their first property because of its versatility.

Why use a SMSF?

  1. SMSF is taxed at significantly lower than personal tax (at 15%). If you rent property out after purchase, you get also taxed at this rate.
  2. Capital gains tax is discounted when the property is sold during the accumulation phase or the pension phase of the SMSF, whereby no tax is required to be paid on the sale.
  3. If the investment property is owned for more than 12 months prior to its sale, then 2/3 of the capital gain is taxed at the 15% fund tax rate and the remaining 1/3 at a full tax rate.
  4. You can use your SMSF to buy your commercial property and pay rent to it at the market rate into your SMSF.

What are the risks?

  1. Investment property improvements cannot be made using borrowed funds in your SMSF. Only basic repairs and maintenance can be made although you can use the funds already existing in your SMSF to do the improvements.
  2. Absence of diversification because a massive portion of the SMSF is used to acquire a single property.
  3. You have tenant risk – It might take some time to find a tenant.
  4. In unforeseen events, like the death of a fund member, there would be a sudden need to sell the property. This could force you to sell in a suboptimal market.

What should I know about SMSF before committing?

  1. Putting funds into your SMSF means you cannot access it until retirement. This is something to consider wisely if you wish to use it to invest in other things.
  2. In order to lend the funds, it is important to have a detailed loan agreement in place, stating the limited recourse borrowing requirements and terms and conditions clearly.
  3. Life insurance premiums are not tax-deductible using SMSF, unlike with a super provider.
  4. Stamp duty cannot be avoided when using an SMSF in your investment property purchase. However, with additional documentation of the initial stamp duty fee, a second stamp duty fee can be avoided.

What are the rules I need to comply with?

  1. If you use your SMSF to purchase the investment property, you or anyone related to you cannot live in it.
  2. If you use your SMSF to purchase the investment property, you or anyone related to you cannot rent it either.
  3. If you’re a FHO planning to live in your first investment property, then you may not use a SMSF as a funding option.
  4. Using SMSF to buy an investment property must comply with the requirement of the ‘sole purpose test’. This means that the investment property is used entirely for providing retirement benefits to fund members.
  5. The investment property cannot be acquired from someone or a corporation related to fund members.

These rules are in place to ensure that SMSF is used for purchasing an investment property for retirement use only.


Using SMSF is certainly a useful method to fund your investment property. However, it has its nuances that can make it complex to use. If you are in doubt and need clarification on how to get to your ideal situation of using your SMSF to purchase your dream investment property, then consider getting in touch with a buyer’s agent.

A buyer’s agent is not only familiar with how to navigate through the requirements of SMSF in property investment, but a buyer’s agent can prevent you from making common mistakes during the process. A financial advisor may also be a good person to reach out to if you’re considering using an SMSF as considerations of your current circumstance and future financial goals may be relevant.

C&M Property Partners specialise in working with First Home Buyers building their investment portfolio. Contact us today to see how we can help build your property investment portfolio!

Disclaimer: Only seek financial advice from a qualified professional financial planner. C&M property Partners is not able to provide direct financial advice, nor are they liable for any financial loss in property investment matters. We can, however, refer individuals to a local financial adviser to support you in seeking further advice when considering in establishing a Self-Managed Superannuation Fund (SMSF).

Chris Skurrie
I am a local buyers agent covering the Newcastle, Lake Macquarie, Hunter and Central Coast regions. I have 15+ years experience in investing, buying, selling property. My business C&M Property Partners helps new home buyers and investors find the right property to meet their needs. In addition we can offer property management and brokerage services to businesses wanting to source residential and commercial properties.
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