Can I buy an investment property with my super?

Introduction

Superannuation is one of the biggest assets Australians build over their working lives. It is designed to support retirement, but many people ask the same question: Can I buy an investment property with my super?

The answer is yes, although there are conditions. You cannot simply withdraw money from your super to buy a property in your own name. Instead, you must establish a Self-Managed Super Fund (SMSF) and ensure the investment complies with Australian Taxation Office (ATO) rules.

This blog will walk you through how SMSF property investment works, the benefits and risks involved, and how expert support from ZedPlus can make the process easier to manage.

The ATO rules on SMSF property investments

To answer the question “can I buy an investment property with my super?”, you need to understand the rules the Australian Taxation Office (ATO) applies to SMSF investments. These restrictions are in place to make sure your super is used only for retirement benefits and not for personal use.

The main restrictions are:

• No loans or financial help: An SMSF cannot lend money or provide financial assistance to members, relatives, or related parties.
• Buying assets from related parties is limited: You generally cannot buy assets from members or relatives unless they qualify as business real property or listed securities.
• No personal use of collectables: Assets such as artwork, jewellery, boats, or vintage cars cannot be used by members or displayed in private homes. They must also be insured in the SMSF’s name.
• In-house asset limits: Investments such as loans or leases to related parties cannot exceed 5% of the fund’s total assets. If they do, trustees must create a plan to reduce them.
• Borrowing rules: SMSFs cannot borrow freely. Borrowing is only allowed under a limited recourse borrowing arrangement that protects other SMSF assets.

Key point: Any investment, including property, must meet the sole purpose test. This means it should only provide retirement benefits and not personal advantages. Failure to comply can result in heavy penalties or the fund being made non-compliant.

How to buy an investment property through superannuation?

If you are asking yourself, “can I buy an investment property with my super?”, the pathway is available but only through a Self-Managed Super Fund (SMSF) Setting up and running an SMSF comes with strict rules from the Australian Taxation Office (ATO), so you need to understand each stage before moving forward.

Here’s a step-by-step look at the process.

Step 1: Set Up an SMSF

To begin, you must establish a compliant SMSF. This involves:

• Drafting a trust deed that outlines how the fund will operate.
• Appointing members who will either act as individual trustees or directors of the trustee company (depending on the SMSF structure).
• Registering the SMSF with the ATO to receive a Tax File Number (TFN) and Australian Business Number (ABN).

Becoming a trustee makes you legally responsible for all decisions of the fund. The SMSF must also pass the sole purpose test, which requires that the fund’s only objective is to provide retirement benefits to its members.

For a detailed overview of trustee responsibilities, compliance requirements, and what to prepare before establishing a fund, read our article on the important factors to consider before setting up an SMSF.

The table below makes it easier for you to understand the difference between the cash rate and the mortgage interest rate.

Step 2: Roll over your super and build the fund balance

Once your SMSF is set up, the next step is to transfer your existing superannuation into the fund. This creates the pool of capital you will use for investments.

Because property is a high-value asset, it’s important for your SMSF to have sufficient capital to cover the costs of the property purchase, including stamp duty, legal fees, and property management costs. The fund should also be able to maintain liquidity for ongoing administrative expenses and ensure compliance with SMSF regulations.

Additionally, having a well-capitalised fund provides the flexibility to borrow under a Limited Recourse Borrowing Arrangement (LRBA), while helping meet diversification requirements to avoid concentrated risk in the fund.

Step 3: Decide on residential or commercial property

Your SMSF is allowed to invest in either residential or commercial property, but the rules are different.

Residential investment property

• The property must only be used to provide retirement benefits, and personal use is prohibited.
  
• The property must be rented to unrelated tenants, and no one from the fund members' family can live there.
• You cannot purchase property from members or related parties, except under very specific conditions (e.g., business real property).
• The property must be rented to arm's-length tenants at fair market value, which complies with the arm's-length transaction rule under ATO guidelines.

Commercial investment property

• An SMSF can purchase commercial property and lease it to a business owned by the trustee or a related entity, provided the rent is at market value.
• A legally binding lease agreement is necessary to ensure that the rent is at market value and is properly recorded in the SMSF accounts.
• Rent must be paid on time and deposited into the SMSF’s bank account.

This flexibility makes commercial property an attractive option for small business owners who want to use their super for property investment, while also paying rent directly into the SMSF.

Step 4: Understand borrowing rules (Limited recourse borrowing arrangement)

Not every SMSF has enough capital to buy a property outright. In this case, your fund may borrow under a Limited Recourse Borrowing Arrangement (LRBA).

Here is how an LRBA works:

• A separate trust, known as a bare trust, is created to legally hold the property on behalf of the SMSF.
• The lender’s recourse is limited only to the property itself. This protects other SMSF assets if the loan defaults.
• Loan repayments, along with all income and expenses, must flow through the SMSF bank account.

Borrowing through super is more complex than taking out a standard mortgage. Banks and lenders apply stricter conditions, require larger deposits (sometimes 30–40%), and charge higher interest rates.

Step 5: Factor in all costs

Buying an investment property through superannuation involves more than just paying the purchase price. As a trustee, you must budget for:

• Stamp duty and legal fees on the purchase.
• Accounting, auditing, and compliance costs for the SMSF each year.
• Loan costs, including application fees and bank charges, if borrowing.
• Ongoing property costs, such as insurance, council rates, repairs, and property management fees.

Every dollar must come directly from the SMSF. You cannot use personal funds to cover these expenses, and doing so could put the fund at risk of breaching ATO rules.

Step 6: Purchase under the correct name

When your SMSF buys an investment property, the contract and title must be registered in the correct name. This is a critical point under SMSF rules, and failure to do so could lead to significant compliance issues.

• If the SMSF is purchasing the property outright (with cash), the title must be registered in the name of the SMSF trustee, such as “XYZ Super Fund as Trustee for XYZ SMSF.” This ensures that the property is legally owned by the SMSF and is in line with ATO requirements.
• If the SMSF is borrowing via a Limited Recourse Borrowing Arrangement (LRBA), the property must be held in a bare trust on behalf of the SMSF. The lender’s recourse is limited to the property itself, and the bare trust structure is an accepted legal structure under ATO rules for borrowing via SMSF.
• If the contract and title are not set up correctly, it can lead to issues like double stamp duty, tax issues, or potentially making the SMSF investment non-compliant with the ATO rules

For this reason, it is critical to have professional advice when signing contracts and completing the settlement. A solicitor or SMSF accountant can ensure the property is purchased correctly from the beginning.

Step 7: Manage the property within SMSF rules

Once purchased, the property must continue to comply with SMSF regulations. This includes:

• If the property is leased to a related business, a formal lease is required to ensure the transaction is arm's length and complies with the ATO's arms’-length transaction rules.
• Rent must always be charged at market value, and payments must be prompt. This ensures the transaction remains compliant with ATO guidelines, which prevent the use of SMSF assets for personal or related-party benefit.
• All property transactions, including leases and payments, must be strictly commercial and at arm’s length to ensure compliance with the sole purpose test and avoid conflicts of interest.
• The property must be maintained through the SMSF, and personal funds cannot be used for property-related expenses. This aligns with ATO guidelines that prohibit trustees from mixing personal and SMSF funds.

For residential property, you must never use it personally or allow related parties to benefit from it. For commercial property, compliance with lease agreements is essential.

Step 8: Stay on top of ongoing obligations

Owning property through super is not a “set and forget” strategy. You must keep up with the SMSF’s ongoing obligations:

• Arrange independent market valuations of the property at appropriate intervals.
• Register the SMSF for GST if the annual rental income exceeds $75,000.
• Trustees must prepare and lodge annual tax returns for the SMSF to comply with ATO reporting requirements.
• An independent audit must be arranged every year to ensure the SMSF complies with all regulations and financial reporting requirements.
• Accurate and detailed records must be kept of all transactions and investment strategies to ensure transparency and compliance with ATO regulations.

If your SMSF breaches the rules, the ATO can impose significant penalties, remove the fund’s tax concessions, or even disqualify the SMSF.

You can find additional details on the ATO’s page covering SMSF administration and reporting

Comparing SMSF property with other super investments

Now that you know what’s required to purchase property with your super, it’s worth weighing it against other SMSF investment options to see which best fits your goals.”

Investment type	What you need to know	Pros for you	Cons for you
Property	Requires a large upfront deposit, stamp duty, and legal costs. You also cover ongoing expenses like loan repayments, rates, and insurance.	Rental income and long-term growth potential Direct control over investment Option to lease commercial property to your business	Most of your super is tied up in one asset High setup and running costs Low liquidity if you need cash quickly
Shares / Managed funds	You invest smaller amounts and adjust your portfolio more easily. Money is spread across industries and markets.	Diversification across many sectors Easier to sell when you need cash Access to global growth opportunities	Market volatility may affect returns Less direct control compared to property
Bonds / Term deposits	Provide a stable income with lower risk. Liquidity is generally higher than property.	Predictable income for your SMSF Low risk and steady cash flow Easy access to funds at maturity	Lower returns than property or shares Limited growth potential over time

At ZedPlus we help you assess whether property, shares, or a mix of assets suits your SMSF strategy. Book a consultation today and let us guide you through the smartest way to grow your retirement savings.

Benefits of using super for property

After comparing the property with other SMSF options, it helps to understand the key benefits this strategy can offer.

• Tax concessions - Rental income is taxed at 15% and capital gains at 10% if held for more than 12 months. In the retirement phase, both may be tax-free.
• Growth potential - Property offers long-term capital growth along with steady rental income.
• Diversification - Adding property spreads your SMSF investments beyond shares or cash.
• Control - You make the decisions directly as a trustee, not a retail fund manager.
• Commercial opportunities - You may lease SMSF-owned commercial property to your business at market rates, keeping rent inside your fund.

Risks of using super for an investment property

Alongside the benefits, you also need to understand the main risks of this strategy.

• High costs - Setup, audits, and ongoing fees can reduce returns if your balance is small.
• Strict compliance - The ATO enforces tough rules, and breaches may lead to penalties or loss of concessions.
• Liquidity limits - Property cannot be sold quickly if your fund needs cash.
• Borrowing restrictions - SMSF loans usually need bigger deposits and come with stricter terms.
• Concentration risk - Investing most of your super in one property increases exposure if it underperforms.

For a complete overview of both opportunities and challenges, read our blog post benefits and risks of buying property through an SMSF.

Who should consider buying property through super?

Buying property inside an SMSF is not for everyone. This approach is better suited to investors who:

• Want more control over how their retirement savings are invested
• Prefer to include property as part of a broader, long-term strategy
• Are prepared to take on trustee responsibilities and follow ATO rules closely
• Value professional advice and are willing to work with accountants, brokers, and SMSF specialists

If you are unsure whether this strategy matches your goals, it is best to seek guidance before making a decision

How ZedPlus helps you with SMSF property investment?

At ZedPlus we know many Australians are asking, “Can I buy an investment property with my super?” Our answer is yes, but only with the right structure, planning, and support.

We are uniquely positioned because we are both accountants and mortgage brokers That means we help you on every side of the process:

• SMSF setup and structuring - making sure your fund is compliant from day one.
• Accounting and compliance - managing audits, investment strategies, and reporting to the ATO.
• Loan and lending advice - guiding you through SMSF loan requirements, negotiating with lenders, and securing suitable borrowing options.
• Investment strategy suppor - helping you decide whether a property suits your retirement goals and risk profile.
• Ongoing guidance - so you avoid costly mistakes and keep your SMSF property investment working for you.

If you are considering using super to buy an investment property ZedPlus is the partner who can give you both the financial and lending expertise you need.

Final thoughts

So, can you buy an investment property with your super? Yes, but only through a Self-Managed Super Fund and only if you meet the strict rules set out by the ATO.

Property in super offers potential benefits such as tax savings, control, and growth, but it also comes with risks like high costs, strict compliance, and reduced liquidity. You need to weigh up whether this strategy fits your retirement timeline, your balance, and your appetite for risk.

Before you take the next step, get professional advice. At ZedPlus, we help you understand exactly how to buy an investment property through superannuation, manage the compliance obligations, and secure the right loan. Book a consultation with our SMSF expert team today and explore how your super can support your future.