Property

Education

There are very specific rules under current Superannuation Laws that must be adhered to when purchasing Property for your SMSF.  These are briefly detailed below.

 

Residential Property

 

Your SMSF is permitted to invest in Residential Property.

 

Commercial Property

 

Your SMSF is permitted to invest in Commercial Property.  At this time borrowing to invest in Commercial Property is not permitted by ESUPERFUND, however a product is scheduled to be launched shortly to enable clients to borrow to invest in Commercial Property.  

 

Transfer of Residential Property from a Member to a SMSF

A SMSF cannot transfer an asset owned by a Member (or an associate of a Member by blood or marriage) to the SMSF unless the transfer is specifically allowed by legislation.  Residential Property is not specifically allowed to be transferred by legislation.  This means that you cannot sell or transfer a Residential Property that a Member of the Fund (or associate of that Member by blood or marriage) owns to your SMSF. This is illegal.

Transfer of Business Property from a Member to a SMSF

 

A SMSF cannot transfer an asset owned by a Member (or an associate of a Member by blood or marriage) to the SMSF unless the transfer is specifically allowed by legislation. Business Real Property (ie property that is used wholly and exclusively in one or more businesses) is specifically allowed to be transferred from a Member (or an associate of a Member by blood or marriage) to a SMSF at market value.  However you will need to consider Capital Gains Tax and Stamp Duty Implications prior to making this transfer.  See here for more.

 

Investment in the Family Home

 

It is expressly forbidden for a SMSF to invest in the Family Home of a Member (or associate of a Member by blood or marriage) irrespective of whether commercial rental is paid.

 

Residential Property must be rented to third parties unrelated to Fund Members

 

Residential Property acquired by a SMSF must be rented out to third parties unrelated to you. This means you cannot rent a property to family including parents, siblings, children or your spouse. You can however rent the property out to unrelated friends.

 

Business Property can be rented to any party on commercial terms

 

Business Property acquired by a SMSF (ie Property that is used wholly and exclusively in one or more businesses) can be rented out to any party including to you or an entity associated to you to the extent that commercial rental is paid.

 

Property Purchase must be in accordance with the SMSF Investment Strategy

 

As a Trustee you must ensure all investment decisions are made in accordance with the documented Investment Strategy of the Fund. We recommend that when your purchase Property for your SMSF, the investment decision is documented detailing how the Property Investment conforms to the Investment Strategy of the Fund. A Standard Investment Minute can be found here.

 

Investing all SMSF Monies in Property

 

There is no specific prohibition to investing 100% of your super monies in one asset class such as Property.  Where such a strategy is adopted, you should clearly define why this is an appropriate strategy for your SMSF and how it conforms to the SMSF Investment Strategy. It is important to remember that risk and diversification are important considerations when implementing your Fund's Investment Strategy. A "one asset" strategy may be considered as increasing your Funds Risk Profile and may not be adequately diversified to mitigate Investment Risk.  So while this strategy is not specifically prohibited you must carefully detail why it is appropriate for your Fund if it is adopted

 

Rent must be banked into the Funds Bank Account established by ESUPERFUND

 

The Rent from the Property Investment (where applicable) must be banked into the Bank Account established for your SMSF by ESUPERFUND.

 

Expenses must be paid from the Funds Bank Account established by ESUPERFUND

 

The Expenses from the Property Investment must be paid from the Bank Account established for your SMSF by ESUPERFUND.

 

Record Keeping

 

In relation to record keeping for Property Investments, ESUPERFUND will send you a Checklist each year guiding you on what documentation we require to prepare your SMSF's annual compliance requirements.

 

 

General Advice Warning

The contents of this website are of a general nature only and have not been prepared to take into account any particular investor's objectives, financial situation or particular needs. Where this publication refers to a particular financial product then you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the PDS before making any decision about whether to acquire the product. We also recommend that you should seek professional advice from a financial adviser before making any decision to purchase any financial product referred to on this website. While the sources for the material are considered reliable, responsibility is not accepted for any inaccuracies, errors or omissions.