Using Your Super to Invest in Property
There’s one question we at MortgageBuzz always ask our clients: How much do you have in your superannuation?
Most people aren’t sure — and most discover they have more than they thought.
Our next question is usually: Have you considered investing through a Self-Managed Super Fund?
For many of our clients, this idea is overwhelming. Most don’t realise there is a way to use your superannuation outside traditional investment facilities, let alone purchase property. But more Australians are exploring SMSFs because they want greater control over their retirement savings and prefer investing in something tangible rather than just numbers on a page.
Today, we’re giving you a simple rundown on how purchasing property within an SMSF works, and answering the questions we are most frequently asked. Switching to an SMSF isn’t something to jump into without understanding the responsibilities involved — including setup costs, ongoing management, compliance, and time commitment.
Important disclaimer: MortgageBuzz is not a tax accountant. Everything written here is general information only and does not take your personal circumstances into account. Please speak with a qualified accountant or financial adviser before making any financial decisions. If you need one, we can recommend a trusted professional.
What is an SMSF?
A Self-Managed Super Fund is exactly what it sounds like — a superannuation fund owned and managed by its members (including you). You control how your super is invested, provided you comply with the ATO’s rules and fiduciary requirements. This includes the ability to invest in the Australian property market.
You can keep your existing superannuation accounts open, including any that hold insurance. Be aware that most funds require a minimum balance to maintain insurance, and may cancel policies if no contributions are made for an extended period.
Setting up an SMSF requires establishing an SMSF trust with either individual trustees or a corporate trustee. To purchase property, you must also set up a Bare Trust (Holding Trust) to hold the property while the loan is repaid. Your SMSF must lodge its own tax return and undergo an independent annual audit.
SMSFs can have up to six members with no relationship requirements — parents, children, friends, or neighbours can all be in the same fund. Multiple super funds can also combine to purchase a single property.
What can an SMSF buy?
Your SMSF may purchase:
- Residential properties (houses, apartments, units)
- Commercial properties (offices, retail, warehouses)
- NDIS-compliant properties
- Short-stay and holiday accommodation (e.g., Airbnb)
As long as the property is used solely for investment, the options are broad.
However, you must maintain an arm’s-length relationship. This means:
- You cannot buy or rent the property to yourself, family, friends, or acquaintances.
- All stays and leases must be fully commercial and at market rates.
- Repairs and maintenance must be completed by independent third parties.
Exception: If you’re self-employed, your SMSF may be able to purchase a commercial property that your business rents from the fund. More on this below,
How much can I spend?
Your borrowing power depends on:
- Your current superannuation balance
- Rental income from the property
- Employer super contributions
- Voluntary contributions
While there’s no official minimum, an SMSF property strategy generally works best with around $200,000 in super. (AFR)
Most lenders allow borrowing up to 70–80% of the property value, depending on the lender and property type. You can also top up your SMSF with voluntary contributions (which may have tax implications — always check with an accountant).
Some lenders require leftover funds after settlement — known as a liquidity buffer, usually 5–10% of the loan amount. These funds can be held in any superannuation facility.
Rental income varies by property type and location. Like any investment, strong rental yield and long-term growth are ideal.
Employer contributions are a minimum of 12% of your gross salary (potentially more depending on your contract). You can also increase contributions via salary sacrifice or personal deductible contributions.
What are the costs?
Before purchasing property, you’ll need to pay for:
- SMSF trust and corporate trustee setup
- Bare/Holding trust setup
- Legal and compliance documentation
Ongoing costs include:
- Annual accounting and audit fees
- Lender fees
- Property management costs
- Potential legal or regulatory expenses
All fees can be paid from the SMSF balance, but you need to ensure the fund has enough to cover ongoing obligations.
Why buy through an SMSF?
There are several advantages:
1. Increased Borrowing Power
Your SMSF may hold more money than your personal savings or equity, giving you the ability to purchase a higher-value asset.
2. Reduced Personal Liability Assessment
Banks do not consider your personal loans, credit cards, or living expenses when assessing SMSF borrowing capacity.
(Exceptions apply if you plan to contribute additional funds via salary sacrifice or if the SMSF has other liabilities.)
3. Tax Benefits
- Rental income is taxed at a concessional rate within super.
- Capital gains tax is reduced in the accumulation phase.
- CGT can be eliminated entirely in pension phase (subject to regulations).
4. Transparency and Tangibility
Many clients prefer investing in Australian property rather than having their super exposed to overseas markets — particularly since traditional funds hold a large portion of assets offshore. (Deutsche Bank)
I’m Self-Employed — can I still buy through an SMSF?
Absolutely — in fact, SMSFs can be especially beneficial for self-employed business owners.
If you operate a business outside your home, your SMSF may purchase a commercial property and lease it back to your business at market rates. This gives you:
- Long-term stability
- Protection from rising rents
- A permanent business location
You’ll need to show at least two years of super contributions, whether to an SMSF cash account or an industry fund, as self-employed super rules differ from PAYG.
Are there any limitations?
Compared to standard investment loans, SMSF lending has stricter rules:
- You cannot access equity or redraw for other purposes.
- You cannot cross-collateralise SMSF property with other assets.
- You cannot use borrowed money for renovations or structural changes.
- Only cosmetic, non-structural improvements are allowed.
- Most lenders don’t offer offset accounts and may limit redraw facilities.
- All transactions related to the property must be at market value and at arm’s length.
These restrictions exist to protect members and ensure compliance with superannuation law.
Conclusion
Purchasing a property through an SMSF can be a powerful, tangible, and tax-effective investment strategy — especially for those with higher super balances, stable income, and a long-term investment outlook.
MortgageBuzz specialises in SMSF lending and works closely with lenders, accountants, and financial advisers to make the process smooth and stress-free.
Book a free chat with our SMSF specialists today and start your SMSF property journey with confidence.