Here’s What You Need to Know
Buying property through your Self-Managed Super Fund (SMSF) is a great way to grow your retirement savings, but it is not as simple as taking out a regular home loan. There are rules to follow, and you will need to be well-prepared before applying for a loan. Here is a simple guide to help you understand what is involved.
1. Your SMSF Must Be Set Up Properly
As a first step, it is important to legally register with the ATO and set up a bank account under the name of the SMSF trust. Secondly, the property that is being purchased through an SMSF loan goes into a separate trust called a Bare Trust. The SMSF is the real owner, but the property is held in the Bare Trust until the loan is paid off. Your accountant can help you with the process, and if you don’t have one, your Mortgage broker can guide you to an accountant.
2. The Property Must Be for Investment Only
If you are buying a property through your SMS,F then you cannot live in it or let a family member live in it. It must be bought only to grow your super for retirement. If it is a commercial property, your business can lease it from the SMSF, as long as it’s done properly and at market rates.
3. Your Fund Must Have Enough Money
Banks want to see that your SMSF has enough balance to cover costs and repayments. A steady income through regular superannuation contributions or rental income is crucial. If your SMSF doesn’t have enough funds, it may not get loan approval. Recommend speaking to your brokers to get a pre-approval.
4. Get the Right People to Help You
You’ll need a team of professionals, including a mortgage broker with SMSF experience and an accountant to make sure your fund stays compliant and can help with the trust setup and paperwork. Trying to do it all on your own can lead to expensive mistakes.
5. Have Your Paperwork Ready
Lenders will ask for things like:
- Your SMSF’s financial records
- Your trust deeds
- Details of rental income or lease agreements
- A financial plan showing how the loan will be repaid
Having this ready can speed up the process.
Buying property through your SMSF can be a smart move—but it’s not a one-size-fits-all solution. It takes planning, the right advice, and a bit of patience. But done right, it can be a fantastic way to invest in your future.
Need help figuring it all out? Please contact Vineet Chaudhary from Smartfinn Advisors on 0411 202 354 (Email: vineet@smartfinn.com.au) to guide you every step of the way.