Buying Property Through Your SMSF

An SMSF purchase has to be set up correctly before the contract is signed. If the wrong name goes on the contract, or the bare trust is not in place when the lender needs it, fixing it later can cost duty, time and sometimes the loan.

Optimum Lawyers is a property law firm in Parramatta Square, led by principal solicitor Wisam Assi. We act on purchases, sales, settlements and transfers in every Australian state and territory. On SMSF purchases we work alongside your accountant, financial adviser and lender. They advise on whether the investment suits your fund. We deal with the legal documents and the purchase.

How an SMSF purchase with a loan is structured

• Limited recourse borrowing. Super law lets a fund borrow to buy a single acquirable asset, with the lender's recourse limited to that asset.
• The bare trust. While the loan is outstanding, the property is held on a bare trust, also called a holding trust, usually by a separate trustee company. The fund holds the beneficial interest.
• Whose name goes on the contract. Usually the bare trustee, as trustee for the bare trust. Getting this wrong is the most common and most expensive mistake. Confirm it with the lender and your accountant before you sign.

Rules that catch people out

• Related parties. A fund generally cannot buy residential property from a member or a related party. Business real property is an exception.
• Using the property. Members and their relatives cannot live in, or rent, a residential property the fund owns.
• Improvements. Borrowed money can be used to repair or maintain the property, but not to improve it.
• One asset. The borrowing must be for a single acquirable asset, which matters where a property is on more than one title.

Duty

Each state has its own duty rules for SMSF and bare trust arrangements, including what happens when the property moves from the bare trustee to the fund once the loan is repaid. A contract signed in the wrong name can mean paying duty twice. Read more in avoiding a costly SMSF settlement mistake.

What we do on an SMSF purchase

1. Check the structure and the purchaser name before you sign.
2. Review the contract and the seller's disclosure.
3. Work with the lender on the bare trust and the loan documents.
4. Handle duty, settlement and registration.
5. Transfer the property to the fund once the loan is repaid.

Buying in another state

Many SMSF purchases are interstate investments. We act on SMSF purchases in every state, and you sign where you live.

What clients say

“He managed so well SMSF property buying process in WA while in NSW!”

Inderjeet Gulati, Google review

Questions about SMSF property purchases

Can my SMSF buy a property from me?

Generally not if it is residential property. Business real property bought from a related party may be allowed if the conditions are met.

Can I live in a property my SMSF owns?

No. Members and their relatives cannot live in or rent a residential property owned by the fund.

Whose name goes on the contract?

Usually the bare trustee, as trustee for the bare trust. Confirm with your lender and accountant before you sign.

Can you act on an SMSF purchase in another state?

Yes. We act on SMSF purchases in every Australian state and territory.

Related: Property transfer lawyers | Contract of sale review | Interstate conveyancing