Property investment through SMSF
Using super to buy property is legal but tightly regulated. LRBA structure, restrictions on related-party use, and the trade-offs vs personal-name investing.
Limited Recourse Borrowing Arrangement (LRBA)
SMSFs can borrow to buy property — but only via an LRBA structure. The asset is held in a separate bare trust until the loan is fully repaid; the lender's recourse on default is limited to that single asset (they can't claim other fund assets).
This structure costs more to set up than a standard property purchase — bare trust deed, additional legal advice, and SMSF lenders typically require 30% deposit. Rates are usually 0.5-1.5% above standard investment loan rates.
What you can and can't do
Can: buy residential or commercial property, rent it to unrelated tenants at market rate, do basic maintenance, sell after capital growth.
Can't: live in the property yourself or rent it to family (residential property only — commercial can be rented to a related-party business at market rate, and this is one of the main use cases). Can't make material improvements during the LRBA period (you can repair, not renovate). Can't change the asset (e.g., subdivide).
An SMSF property can't be your weekend beach house. Breaches trigger fund non-compliance and 47% tax on the fund's earnings.
When SMSF property makes sense
Higher-balance funds where the property doesn't dominate fund concentration. Business owners buying their own commercial premises (rent paid to the SMSF is deductible to the business; received tax-free at retirement). Long holding periods — 15+ years — to amortise setup costs and benefit from concessional super tax (15% in accumulation, 0% in pension phase).
When it doesn't: small balances (concentration risk), short hold periods, residential property bought primarily for capital growth (you can't access the gains until preservation age).
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