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.
Key takeaways
- You can only buy property with super through a Self-Managed Super Fund (SMSF).
- All SMSF investments must meet the sole purpose test to benefit retirement only.
- SMSFs cannot purchase residential property for personal or related party use.
- Commercial property can be leased to your own business if the rent is market-based.
- SMSFs can borrow under strict rules using a Limited Recourse Borrowing Arrangement (LRBA).
- Professional advice is essential to ensure SMSF property rules are followed and enforced.
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 (up to six) who will all act as trustees.
- 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 our 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.
Property is a high-value asset, so you need a significant balance to make it viable. Most experts recommend a minimum of $200,000 to $250,000 in combined member balances. Anything lower and the setup costs, legal fees, and ongoing compliance may outweigh the benefits.
When planning your fund’s balance, you should also think beyond just the property purchase price. Your SMSF must have enough liquidity to cover stamp duty, legal fees, property costs, and ongoing administrative expenses.
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
- You cannot live in the property yourself.
- You cannot allow family or related parties to live in it.
- The property must be purchased from an unrelated third party.
- It must always be rented at commercial market rates to unrelated tenants.
Commercial investment property
- You may lease the property to your own business or a related business, provided the rent is at market value.
- A formal lease agreement is required, just as it would be with any third-party arrangement.
- Rent must be paid on time and into the SMSF account.
This flexibility makes commercial property attractive for small business owners who want to pay rent into their own retirement savings rather than to a landlord.
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.
Need help arranging finance for your SMSF property purchase?
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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 set up in the correct name.
- If your SMSF is buying the property outright with cash, the title is registered in the name of the SMSF trustee (for example, “XYZ Super Fund as Trustee for XYZ SMSF”).
- If your SMSF is borrowing through a Limited Recourse Borrowing Arrangement (LRBA), the property must be held in a separate bare trust on behalf of the SMSF. This structure limits the lender’s claim only to that property.
Getting this step wrong can lead to costly problems, such as double stamp duty, tax issues, or even having the ATO rule that your SMSF investment is non-compliant.
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:
- Having a formal lease in place, especially if it is leased to a related business.
- Ensuring rent is always at market value and paid promptly.
- Keeping all transactions strictly commercial and at arm’s length.
- Maintaining the property through the SMSF and not using personal money for expenses.
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.
- Prepare and lodge annual SMSF tax returns.
- Arrange independent audits every year.
- Keep accurate records of all transactions and investment strategies.
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. |
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| Shares / Managed funds | You invest smaller amounts and adjust your portfolio more easily. Money is spread across industries and markets. |
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| Bonds / Term deposits | Provide a stable income with lower risk. Liquidity is generally higher than property. |
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|
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
Case study example
To understand how this works in practice, let’s look at a simplified example of an SMSF investing in property.
An SMSF is set up with four members. Each rolls over $150,000 from their existing super accounts, giving the fund a balance of $600,000.
The trustees decide to buy a commercial property worth $800,000. The SMSF contributes $400,000 as a deposit and borrows the remaining $400,000 through a Limited Recourse Borrowing Arrangement (LRBA).
Here’s how the investment plays out:
- The SMSF receives $3,500 in rent each month, which is paid by the business operating from the property.
- Rental income is taxed at 15% inside the SMSF, lower than the personal tax rate the members would pay individually.
- The rent helps cover loan repayments, with any surplus added to the fund’s cash balance.
- Over 10 years, the property increases in value, building retirement savings while the debt gradually reduces.
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.
FAQs
How much money do I need in my super to buy an investment property?
The amount you need in your super depends on the property price, lender requirements, and your SMSF balance. In most cases, you will need at least $200,000 to $250,000 in your SMSF before property becomes a viable option.
When buying property through an SMSF:
- Lenders generally require a deposit of 20% to 30% of the property’s value.
- Some lenders also apply a liquidity test, meaning your SMSF must retain 10% to 20% of its balance in liquid assets such as cash or shares after the purchase.
- Additional costs such as stamp duty, legal fees, insurance, ongoing SMSF compliance, and property management must also be factored in.
If your fund does not have enough to cover these requirements, property may not be suitable at this stage.
How long after buying an investment property can you live in it in Australia?
If the property is purchased through a Self-Managed Super Fund (SMSF), you can never live in it. The ATO rules prohibit members, their families, or related parties from occupying or renting a residential property owned by an SMSF, even after retirement. The property must always remain an arm’s length investment, leased to unrelated tenants at market rates.
If you purchase an investment property outside of super, you can move into it once any lease with tenants ends and you meet your lender’s requirements. There is no fixed waiting period — it depends on your tenancy agreements and loan conditions.
What is the 5% SMSF rule?
The 5% SMSF rule sets a strict limit on how much of your fund can be invested in in-house assets. These are investments or arrangements involving related parties, such as loans to members, investments in a company or trust controlled by members, or property or equipment leased to related parties.
At the end of each financial year, the market value of all in-house assets must not exceed 5% of the total assets of the SMSF. If the limit is breached, trustees are required to create and implement a written plan to reduce the in-house asset percentage below 5% by the end of the following financial year. Breaches can lead to heavy ATO penalties and loss of compliance status.
For more information on the 5% SMSF in-house asset rule, visit the ATO’s official website.
Can an SMSF sell its investment property later?
Yes, your SMSF can sell an investment property, but the sale must be at market value to comply with ATO rules. The tax outcome depends on the fund’s phase.
In the accumulation phase, capital gains are taxed at 15%, or 10% if the property was held for more than 12 months. In the pension phase, rental income and capital gains may be tax-free, provided balance caps are met.
Selling also involves costs such as legal fees and agent commissions. At ZedPlus, we guide trustees through SMSF property sales to ensure compliance, manage tax implications, and align the sale with retirement goals.
