What Can an SMSF Invest In?
An SMSF can invest in a wide range of assets, including shares, managed funds, term deposits, direct property, and cryptocurrency, provided the investment is permitted under the SMSF's Trust Deed, meets the sole purpose test, and complies with superannuation rules around related parties, arm's length dealings, and, for collectables and personal use assets, strict storage and insurance requirements.
What types of investments can an SMSF hold?
SMSFs commonly hold listed shares, exchange traded funds, managed funds, term deposits and cash, direct residential or commercial property, and cryptocurrency. Collectables and personal use assets, such as artwork, wine or vehicles, can also be held, but are subject to significantly stricter rules than other asset classes.
What is the sole purpose test and why does it matter?
Section 62 of the Superannuation Industry (Supervision) Act 1993 requires an SMSF to be maintained solely to provide retirement or death benefits to members. Every investment decision needs to be evaluated against this test, including whether a member or their related parties could benefit from the investment in the present, rather than at retirement.
Can an SMSF invest in collectables or personal use assets?
Yes, but they're subject to specific rules under the superannuation regulations. The regulations set out which investments are considered collectible and subject to the rules. It is best to check your proposed investment against this list. Collectibles subject to the rules can't be leased to, or used by, a related party, can't be stored in a related party's private residence, must be insured in the SMSF Trustee's name within 7 days of purchase, and need a written record of the storage decision and reasoning.
Are there investments an SMSF cannot make?
An SMSF generally cannot lend money or provide financial assistance to a member or their relatives, and is restricted from acquiring assets from related parties, with limited exceptions such as business real property and listed securities purchased at market value. SMSFs are also required to keep in-house assets, broadly, investments in or loans to related parties, below 5% of the fund's total assets.
Frequently asked questions
Can my SMSF buy shares in a private company I run?
It's possible in some circumstances, but acquiring assets from related parties is heavily restricted, and this would also count toward the fund's in-house asset limit, so it needs careful assessment before proceeding.
What is the in-house asset rule?
It's a rule limiting an SMSF's investments in, or loans to, related parties to no more than 5% of the SMSF's total assets, to prevent the fund's assets from being too concentrated in related party dealings.
Can my SMSF lend money to a family member?
No, SMSFs are prohibited from lending money or providing financial assistance to members or their relatives.
Not sure whether an investment is allowed in your SMSF? Contact Lifetime SMSF on 1300 031 943 or visit lifetimesmsf.com.au.
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.