SMSFs investing in property
If you’re considering buying property using your Self-Managed Super Fund (SMSF) it’s important you understand the rules relating to SMSFs and property.
Firstly, the property can only be used for providing retirement benefits to the SMSF members otherwise it will breach the ‘sole purpose test’. This means you or your relatives cannot live in property owned by your SMSF.
Other rules you will need to consider include:
Residential property cannot be:
- purchased by the fund from a member or a related party of a fund member
- rented by a fund member or any related party of a fund member.
Commercial property that is used solely for business purposes can be:
- acquired by the fund from a member or a related party, providing the acquisition is at market value. If the trustees are not able to show evidence that their property is used solely for business purposes or is reported at market value in the financial statements this is a breach of the super laws.
- leased at market value to a fund member or related parties of a fund member.
If you’re the trustee of an SMSF that is looking to invest in property, you should ensure the investment complies with the super laws. Where the super laws are breached, penalties can apply and you may be disqualified as a trustee and lose the ability to operate your SMSF.
If you think your fund’s property investment may be breaching the super laws, you should ask your SMSF professional for assistance on how your SMSF can rectify any breaches. You may also wish to make a voluntary disclosure by using our SMSF early engagement and voluntary disclosure service.
You should also watch out for illegal schemes promoting the use of an SMSF to help members buy property in their personal name. This is a breach of the super laws and serious penalties can apply.
If you think a promoter has helped you use your superannuation benefits to acquire a property in your personal name to live in, you should contact the Australian Taxation Office on 13 10 20 to let them know and get advice. Alternatively, you can also use ATO’s SMSF early engagement and voluntary disclosure service.
Beware of SMSF promoter schemes
The sole purpose of a Self-Managed Super Fund (SMSF) is to save up for your retirement savings.
There are people promoting early access schemes. The link will download a file which are illegal and could cost you more than your retirement savings. Be on the lookout for dodgy advice, don’t take up any offers without first checking if they are legal and learn how to spot the warning signs.
If you have been approached by anyone telling you that you can withdraw your super early (without meeting a condition of release) you need to:
- stop any involvement with the scheme, organisation or the person who approached you
- not sign any documents
- not provide them with any of your personal details.
You should also report any interaction you may have had with a promoter to us as soon as possible.
If you illegally access your super early, you can lose your retirement savings, pay extra tax, penalties and interest, and be disqualified from being an SMSF trustee. Disqualified trustees names are published online.
If you have been involved in a scheme, contact the Australian Taxation Office immediately. We will take your voluntary disclosure and circumstances into account when determining any penalties.
