Why You Should Consider Using Your Super to Set Up an SMSF and Buy an Investment Property
What is an SMSF Investment Property Purchase?
Why Leverage Matters: Growing Your Super Faster
One of the biggest advantages of using an SMSF to buy property is leverage.
- If you leave your super in a traditional fund, your returns are limited to what your balance can generate.
- Some investors use SMSF loans to leverage their superannuation, which can allow them to control a larger asset. This might enhance returns, though it also involves risks.
For example:
- With $200,000 in super, you could only invest that $200,000 in shares or managed funds.
- If you use that $200,000 as a deposit on a $500,000 property, the bank covers the rest through an SMSF loan. You now control a $500,000 asset, and any capital growth is based on that full amount, not just your super balance.
Key Benefits of Buying Property Through an SMSF
Lower Tax on Rental Income
The rental income your SMSF earns is taxed at only 15% (compared to your personal tax rate, which could be much higher).
Reduced Capital Gains Tax
If the property is held for more than 12 months, capital gains tax is reduced to 10%. If you sell the property during the pension phase, capital gains tax can be 0%.
Tax-Deductible Expenses
Interest on the loan, property management fees, and maintenance costs are all tax-deductible within the SMSF.
Things to Consider Before Buying Property in an SMSF
Borrowing Restrictions
- SMSFs can borrow money under a Limited Recourse Borrowing Arrangement (LRBA).
- Higher deposits are required (usually 20-30%), and fewer lenders offer SMSF loans.
- The bank can only seize the property, not other SMSF assets, if the loan defaults.
ATO Compliance Rules
- SMSFs can borrow money under a Limited Recourse Borrowing Arrangement (LRBA).
- Higher deposits are required (usually 20-30%), and fewer lenders offer SMSF loans.
- The bank can only seize the property, not other SMSF assets, if the loan defaults.
Long-Term Commitment
- SMSFs can borrow money under a Limited Recourse Borrowing Arrangement (LRBA).
- Higher deposits are required (usually 20-30%), and fewer lenders offer SMSF loans.
- The bank can only seize the property, not other SMSF assets, if the loan defaults.
Who Should Consider
Buying Property Through an SMSF?
Final Thoughts
Buying property through an SMSF can be a game-changing strategy for growing your retirement savings. It allows you to leverage your super, take advantage of tax benefits, and diversify your investment portfolio. However, it’s important to ensure it aligns with your financial goals and that you seek professional advice to remain compliant with ATO regulations.
Would you like help structuring an SMSF property investment to maximise your returns? Book in a free call today.
You may also like to read
Why You Should Consider Using Your Super to Set Up an SMSF and Buy an Investment Property
Regional Australia’s Property Boom in 2025: Where Smart Investors Should Be Looking
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