SMSF Property Purchase — With Borrowings

Purchasing property through a self-managed super fund (SMSF) with borrowings can grow your retirement savings, but it requires careful planning, correct trust structures, and strict compliance with super rules. At autoSMSF, we guide clients through the process, including Bare/Holding Trust setup, ensuring your investment is structured correctly. This guide outlines the key steps for buying property through an SMSF with borrowings.

1

Research and Seek Advice

Before starting, understand the rules around SMSF property investment and borrowing. Research legal requirements, borrowing limits, and investment restrictions.
Consult a financial adviser, accountant, and mortgage broker to determine your SMSF’s borrowing capacity and the suitability of property investment. This ensures decisions align with your retirement goals.
2

SMSF Setup

Establish the SMSF & trust deed before purchase.
Complete forms, register with the ATO, and ensure your deed permits LRBA and property investments.
3

Loan Pre-Approval

Confirm lender requirements and borrowing limits.
Obtain pre-approval to clarify repayment obligations, interest rates, and loan-to-value expectations.
4

Engage Professionals and Search for Property

With pre-approval, start searching for properties that match your SMSF’s investment strategy.
Engage a conveyancer, solicitor, or buyer’s advocate if needed. Evaluate properties by location, rental yield, growth potential, and strategy alignment. Once a suitable property is identified, make an offer and negotiate the purchase.
5

Bare/Holding Trust Setup

If your SMSF is borrowing, a Bare or Holding Trust must be established.
This trust holds legal title until the loan is repaid, while your SMSF remains the beneficial owner, ensuring compliance under a Limited Recourse Borrowing Arrangement (LRBA). autoSMSF prepares a compliant bare trust deed, allowing the property contract to be signed correctly.
6

Property Settlement

After the bare trust is in place and financing is approved, settlement proceeds via your conveyancer and lender.
Payments, including deposits and loan balances, are made through the SMSF to maintain compliance. Correct settlement ensures the SMSF legally owns the property within the trust structure.
7

Property Management

Engage a property manager to maintain the property, manage tenants, and collect rental income.
Proper management ensures all financial transactions are recorded in the SMSF bank account and aligns with your investment strategy.
8

Ongoing SMSF Administration

autoSMSF manages all ongoing administration, accounting, and compliance, including annual financial statements,
SMSF tax returns , independent audits, and maintaining bare trust compliance. With administration handled, you can focus on your investment with confidence.