Property Purchase
SMSF Property Purchase Structure & Requirements
Setting up the right structure is essential when buying property through a Self-Managed Super Fund (SMSF).
In most cases, the recommended approach is to use:
- an SMSF with a corporate trustee, and
- a bare trust (custodian trust) with a separate corporate trustee
This structure is widely accepted by lenders and helps ensure compliance with SMSF borrowing rules. Both entities can typically be established within 1–2 days, with full support provided throughout the purchase process.
A typical Structure of the SMSF borrowing:
How to Buy Property Through an SMSF (Step-by-Step)
To stay compliant with SMSF borrowing rules, follow the process below:
1. Review Your Trust Deed and Investment Strategy
Make sure your SMSF trust deed allows borrowing and property investment. Your investment strategy should also reflect this. Updates can be arranged if required.
2. Choose the Right Property
Find a suitable investment property and provide the details, including the address and an unsigned contract of sale, for review before proceeding.
3. Confirm SMSF Borrowing Capacity
Most SMSF lenders offer up to 80% Loan-to-Value Ratio (LVR) for both residential and commericial properties. For vacant commercial properties, the additional 10% GST component may also be financed, depending on the lender.
4. Set Up a Bare Trust Corporate Trustee
A separate company must be established as the trustee of the bare trust.
This entity is distinct from the SMSF trustee and exists solely to hold the property on trust.
5. Establish the Bare Trust
A bare trust deed is prepared, including the property details.
The deed must be stamped according to state requirements before settlement. Stamp duty rules vary depending on the state.
6. Sign the Contract Correctly
The contract of sale must be in the name of:
“Trustee Copmany Name for the Bare Trust”
This ensures the structure complies with SMSF borrowing regulations and also avoid double stamp duty implications.
7. Pay the Deposit
The SMSF trustee usually pays a 10% deposit.
Ensure the receipt correctly lists the bare truste trustee as the purchaser.
8. Finalise Loan Approval
Once your loan is approved, review and sign the lender’s final loan documents.
Some lenders may require a Legal Practitioner’s Certificate (LPC) as part of the process. If you’re our client, we can help arrange this and guide you through the requirements to ensure everything is completed correctly.
9. Settlement Process
At settlement, the lender releases the loan funds to complete the purchase.
The SMSF then pays the remaining balance along with associated costs, including stamp duty and legal fees.
All settlement payments are processed as directed, typically through PEXA (Property Exchange Australia) for a secure and streamlined transfer.
Need Help with SMSF Property Investment?
If you’re considering borrowing within your SMSF to purchase property, it’s important to get the structure right from the start.
Feel free to get in touch for guidance tailored to your situation.
Disclaimer
This information is general in nature and does not take into account your personal objectives, financial situation, or needs. You should obtain independent professional advice before making any financial or investment decisions. Loan application support and credit assistance (where applicable) is provided by authorised credit representatives of an affiliated entity. iCare Super does not hold an AFSL and does not provide financial product advice or recommend any investments, including property. You are responsible for conducting your own due diligence when dealing with property developers, real estate agents, buyer’s agents, or financial advisers. To the maximum extent permitted by law, iCare Super accepts no liability for any loss arising from reliance on this information.