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If you wish to purchase a property without relying solely on your hard-earned salary, you can still make it happen by incorporating a self-managed super fund (SMSF.) It’s a financial plan that helps you borrow a specific amount of money and use it on a direct property purchase.


However, it’s different from applying for a traditional home loan because it involves several limitations. Keep reading below to learn more about SMSFs and what they entail regarding investing in the property you desire.  


Buying a Residential Home


When you purchase a residential property using an SMSF, take note that you, as well as other potential trustees or that of their family members or relatives,  cannot live in it. Other than that, you, your trustee, or anyone related to them cannot rent the property.


Whether it’s a residential home or a vacation home, using an SMSF to fund it prevents you from moving into your property. Moreover, if you’re already paying for a residential property, you cannot transfer it to your SMSF, whether it involves funding it at market value or paying for it within the cap limits.


Buying a Commercial Establishment


On the other hand, the rules for investing in commercial property and setting up a self-managed super fund are different compared to dealing with a residential property. You can purchase or rent a commercial property using an SMSF, as well as trustees or people related to them, but there are still distinct policies.


Funding for a commercial property using an SMSF allows the business owner and their trustees the rights to it. Investing in a commercial building for business purposes involves applying for a particular SMSF loan and comprises stricter requirements compared to traditional loans.


If you own a small business, you can apply your SMSF to acquire a commercial property and address your rental expenses through the SMSF. However, the amount of the rent should be at the market rate, which does not involve discounts, and you have to guarantee not to miss the deadline and pay in full each time.


What to Expect When Buying or Renting a Property


Once you acquire a commercial property through an SMSF, you must pay fifteen per cent tax on rental income from the property using your fund. Meanwhile, if your property is held for over a year or longer, your fund will acquire a one-third discount on the capital gain it receives during the sale. As a result, it reduces any capital gains tax liability to ten per cent.


But if you acquire the property using a loan, you can subtract the interest payments you make for tax purposes from the fund. But if your expenses go over the income, you will face a taxable loss, which you can keep carrying every year, allowing you to offset it on the taxable income you face in the future.


The moment you or your trustees attain the pension during retirement, if there are still rental income or capital gains that appear from the fund, they will be considered free from tax. In addition, if the property you own faces a loss, you are not allowed to offset any tax losses present from your other taxable income that happens outside of the SMSF.




Buying a residential or commercial property using your SMSF is possible, but it does have some rules and regulations that are different from applying for a traditional loan to use as your funds. If you require guidance to help you manage your property buying accordingly, you should get a mortgage consultant to expound the pros and cons of using your SMSF for funding a property.


Are you looking to hire the best mortgage broker in Sydney? Wealthy You is a mortgage company and lending specialist that provides a wide array of mortgage solutions to address your needs, including home refinancing. Get in touch with us today to apply for an SMSF loan!