Can Your SMSF Buy Direct Property?
Yes, an SMSF can invest in direct residential or commercial property, but it generally cannot purchase residential property from a related party, must pay an arm's length price, and needs to consider liquidity, insurance, and the audit evidence required each year.
Can an SMSF buy property from a related party?
Residential property generally cannot be purchased from a related party of the fund. Business real property, such as a commercial premises, can be purchased from a related party, provided it occurs at arm's length market value.
What insurance considerations apply to SMSF property?
As a large portion of the fund's assets may be tied up in the property, appropriate landlord and building insurance is an important part of meeting the trustee's duty of care, and the policy needs to be held in the name of the SMSF trustee as trustee for the fund.
What records does the SMSF auditor need for a property investment?
Auditors typically require the purchase contract, settlement statement, valuations, lease agreement, insurance policies, and each year's rental statements, council and utility accounts, and any tax depreciation report to support the fund's financial statements.
How does property affect the fund's liquidity?
Property is not readily converted to cash. Trustees need to plan for how the fund will meet its ongoing expenses, contributions shortfalls, or unexpected costs such as vacancy periods, without relying on being able to quickly sell the property.
Frequently asked questions
Can I live in a property owned by my SMSF?
No, residential property owned by an SMSF cannot be leased to a member or their related parties.Can my SMSF buy my business premises?
Can my SMSF buy my business premises?
Business real property can be purchased from a related party and leased back to that related party, provided it occurs at arm's length market value.
Does my SMSF need a tax depreciation report?
A tax depreciation report helps ensure the fund claims the deductions it's entitled to on the property and is commonly requested as part of the annual accounts process.
Thinking about buying property through your SMSF? Contact Lifetime SMSF on 1300 031 943 or visit lifetimesmsf.com.au to talk to a specialist.
This information is general and factual in nature. It is not financial product advice, legal advice or tax advice. Lifetime SMSF Pty Ltd is not licensed to provide financial product advice under the Corporations Act 2001. If you require personal advice, consult an appropriately licensed or authorised financial adviser.