Unlocking Opportunities: Step-by-step guide to help you understand how to purchase property using your superannuation

Buying property using your superannuation in Australia is possible, but it must be done within the rules set by the Australian Taxation Office (ATO). The most common way to do this is through a Self-Managed Super Fund (SMSF).

🏡 How to Purchase Property Using Your Super in Australia

✅ The Only Way: Set Up a Self-Managed Super Fund (SMSF)

You can’t use your regular retail or industry super fund (like AustralianSuper, Hostplus, etc.) to directly buy property. The only way to do it is through an SMSF, which gives you control over how your super is invested—including property.

📋 Step-by-Step Guide

1. Set Up an SMSF

An SMSF is a private super fund that you manage yourself, as a trustee. You can have up to 6 members (usually family members).

You’ll need:

A trust deed

A Tax File Number (TFN) and Australian Business Number (ABN)

A separate bank account for the SMSF

To register with the ATO

👉 Tip: Most people get help from an accountant or financial adviser to set this up legally and correctly.

2. Roll Over Your Super

Once the SMSF is established, you can roll over your existing super balance from your current fund(s) into the SMSF account. This becomes the fund's capital for investment.

3. Understand What Property You Can Buy

The property must meet strict ATO rules, including:

✅ Must:

Be for investment purposes only

Provide retirement benefits to fund members

Be arms-length (no personal use or dealings)

❌ Can’t:

Be lived in by you, your family, or any fund member

Be purchased from a related party (unless it’s commercial property)

Be rented to a fund member or associate (for residential property)

4. Choose Between Cash Purchase or Borrowing

Option 1: Buy Property Outright (with Super Balance)

If your SMSF has enough funds (typically $200k+), you can buy the property outright in the name of the SMSF.

Option 2: Borrow to Buy Property (Using LRBA)

If your super doesn’t cover the full cost, your SMSF can borrow money using a Limited Recourse Borrowing Arrangement (LRBA).

The property is held in a separate bare trust until the loan is repaid.

If the loan defaults, the lender’s recourse is limited to the property only (not your other SMSF assets).

Lenders typically require a 20–30% deposit and stricter conditions.

5. Manage the Property Within SMSF Rules

The SMSF receives the rental income, pays the expenses (like rates, insurance, loan repayments), and gets the capital gain when sold. All proceeds must stay in the fund until retirement.

You’ll also need to:

Prepare annual financial statements and audits

Lodge SMSF annual returns

Stay compliant with superannuation and tax laws

🧾 Example: Buying an Investment Property with Super

Let’s say you and your partner each have $150,000 in super. You combine this into an SMSF with $300,000.

You use $240,000 as a deposit for a $600,000 property

Borrow the remaining $360,000 under an LRBA

The SMSF collects rent, pays the mortgage, and grows the value of the asset

You can’t live in the house, but the SMSF gets all the benefits.

🏢 Can You Buy Commercial Property?

Yes — and the rules are more flexible.

In fact, many business owners buy their business premises through their SMSF and lease it back to their own company at market rent.

This can be a smart tax-effective strategy when done correctly.

⚠️ Important Considerations

Costs: Setting up and running an SMSF can cost $2,000–$5,000+ per year

Complexity: Managing your own super fund comes with legal responsibilities

Liquidity Risk: Property is illiquid—hard to sell quickly if you need cash

Penalties: Non-compliance can result in hefty ATO penalties

👨‍💼 Should You Get Professional Advice?

Yes. Buying property with super is not something you should DIY unless you’re experienced with SMSFs, tax law, and property investing.

Speak to:

A financial adviser (SMSF specialist)

A licensed mortgage broker (if borrowing)

An accountant with SMSF experience

🧠 Quick Summary

Question: Can I use super to buy property?

Answer: Yes, via a Self-Managed Super Fund (SMSF)

Question: Can I live in it?

Answer: No – it must be for investment only

Question: Can I borrow?

Answer: Yes, using an LRBA loan

📌 Final Thoughts

Using your super to buy property can be a powerful wealth-building tool but only if you follow the rules. With the right structure, good advice, and a clear investment strategy, your SMSF could become a key part of your retirement plan.