Can I Use my Self Managed Super Fund To Buy A House?

A common question on many Australians’ minds is can you use your super to buy a house?
Although it is usually intended for retirement, more people are deciding to use their super fund to purchase property. The concessional tax rate and limited access to the funds saved means many Australians find it much easier to save the deposit for their first home compared to other ways of saving.

However, if you are wanting to purchase a home with the money saved using a Self Managed Super Fund (SMSF), you will need to be aware of the unique purchase and loan conditions.

Purchasing Property with a Self Managed Super Fund

If you are purchasing a property using your SMSF, it will need to meet a number of criteria. These legal and tax conditions include passing the Sole Purpose Test Income, no trustees or related persons renting or living in the property, and if purchasing a commercial property it must be used for business purposes only.

The Sole Purpose Test

When self managing your super fund, you are required to undertake the Sole Purpose Test to receive the usual tax concessions and benefits. The main purpose of the test is to determine whether your super is being used to increase the return of the fund and not to provide financial pre-retirement benefits to the trustees. For example, if you are using the SMSF to invest in precious artworks, you are unable to use them to decorate your own home.

Trustees Living or Renting in Property

A key condition of purchasing a property using your SMSF is that no trustee or related parties can live or rent the property. This includes a seasonal or holiday home, so you are unable to use your super fund to purchase a beach home to use in the Summer.

Purchasing Property from a Trustee

Much like how you are unable to live or rent in the property, you cannot use your super fund to purchase property from a trustee or related party. If a family member is selling their home you cannot purchase it using your SMSF as they are considered a related party.

Commercial Property Use

You can use your SMSF to purchase a commercial property and lease it to a trustee or related party, as long as it’s being used solely for business purposes. If you are leasing the property to a trustee or related party’s business, it must be leased at market rate and follow the relevant rules.

Self Managed Super Fund Property Loans

If you intend to take out a home loan using your SMSF, you will need to adhere to some strict conditions as well as take into account certain risks.

Some of these conditions and risks include:

Limited Borrowing: Due to the limited recourse borrowing arrangement, you are only able to purchase a single asset (residential or commercial) using your SMSF.
No Alterations: You are unable to make any changes to the character of your property until you pay off your SMSF loan.
Higher Costs: SMSF loans are usually more costly than other property loans. The fund will also pay 15% tax on the property’s rental income.
Possible Tax Losses: Unlike other arrangements, you cannot offset the property’s taxable losses on your income outside of the fund.
Cash flow: All loan payments must come from the SMSF so your fund will need to have enough cash flow to keep up regular payments.

The First Home Super Saver Scheme

The First Home Super Saver Scheme (FHSS Scheme) enables people to purchase their first home by saving through contributions to their super.

You are eligible for the FHSS Scheme if you:

Are 18 years or older
Have not owned any property in Australia (including land, commercial property, or investment)*
Have not previously applied for the FHSS Scheme

*If you have owned property within Australia, but fall under the financial hardship category, you may still be able to apply for the FHSS Scheme.

In the case of applying for the FHSS Scheme with a SMSF, you need to determine whether your deed authorises and facilitates the releasing of FHSS amounts to the ATO. You will also need to make the right contributions to receive the FHSS, which include salary sacrifice contributions and personal voluntary contributions.

Seek Professional Advice

Purchasing property through a Self Managed Super Fund can be a complicated process, and failing to adhere to tax obligations can result in significant penalties so it is best to seek the advice of a professional tax agent.

If you are interested in using your SMSF to purchase property, get in touch with the experienced accountants at Stones Sharp. We will be able to assist you with ensuring that your SMSF follows the proper procedures to purchase your property or access the First House Super Saver Scheme.

Shane Borg

FCPA & CA

Shane is a Fellow of the Australian Society of Certified Practicing Accountants and a Chartered Accountant.

Shane’s passion is to consider the clients, the client’s business and taxation affairs with a holistic approach whilst providing business mentoring, business strategies, systems development, taxation advice and taxation planning in order to assist his clients and their business achieve their goals.

Julian Phang

09:00 14 Feb 19

Over 20 years minimum hassle starting with Ken and then with Shane.

John La Rocca

23:07 06 Sep 18

I have been dealing with Shane Borg and Stones Sharp for well over 20 years. Shane's personalised approach focused on providing practical and commercial solutions to business and personal problems has always been first class......Shane is truly our "Trusted Advisor".

Steven Edwards

03:50 17 Oct 18

Our family has been working closely with Stones Sharp for well over 15 years and would like to express our gratitude for the straightforward and honest advice over the years.

Marisa Panettiere

13:26 17 Aug 18

Shane and the team at Stones Sharp have been great to deal with. Very helpful and go the extra mile.

Andrew Sanderson

00:09 25 Nov 17

I have been a client of Shane Borg for some 20 plus years. Over this time I have always sought Shane’s advice for my business, investment ventures, taxation planning and obligations for my ventures and self-managed superannuation fund. Shane provides honest and directional advice that you can utilise within your decision making processes. Shane and the team at Stones Sharp are more than tax accountants, they are akin to business partners assisting me in wealth creation and business management advice…. They truly care about me and my family.The team at Stones Sharp are both proactive and responsive while they continue to communicate regularly. I highly recommend Shane and the Stones Sharp team.

Nimish Jha

06:20 27 Jun 19

Professional, quick, hassle-free, and personalised service from everyone I dealt with. Highly recommended.

Kylie Bismire

01:34 09 Aug 19

As a new customer to Stone Sharp we have had fantastic service from Shane & his team. Arriving with a messy lot of accounts, Stone Sharp made the process of sorting it out & simplifying it an easy process. Taking away all our stress & making the accounting process an easy one.

Daniel Stones

10:40 25 Mar 20

Great to deal with and I highly recommend! Shane and the entire Stones Sharp team are deeply understanding of the challenges faced by business owners. The care and empathy they show to their clients is second to none.

Ali Irfanli

23:42 25 Mar 20

Shane was invaluable with helping my business to sort out a complicated tax matter. I felt very supported during the current time where there is a lot of uncertainty. I highly recommend Shane and his team.

Pippa Sowdon

08:55 13 Aug 20

Shane was incredibly responsive and was able to assist and provide value by providing a contact who would be able to assist with an accounting service which was outside of his core business services. Thank you for going above and beyond.

Adam Aitken

10:26 21 Sep 20

We moved from a large accountant firm to Stonessharp via a recommendation. The trust, service, care and attention to detail from Shane and his team has been brilliant and was exactly what we needed. We are a medium size trades business operating in multiple states that need constant support and advice. Stonessharp exceeded the recommendation and we are thoroughly pleased with our move. Thanks again to Shane and the staff at Stonessharp, keep up the great work.

Michael Finn

04:05 24 Nov 20

Shane and all the team at Stones Sharp have been fantastic for us since swapping over to them nearly three years ago.From initial 360 degree analysis of the business, then putting logical steps in place to turn the business around and onto sustainable planning for the future. What Shane and his team have done in this time is unbelievable from both a business and personal point of view.I would highly recommend Stones Sharp to any business owner and we are looking forward to a long and fruitful working relationship (and plenty coffees!).

George Lenk

03:19 08 Mar 21

Very helpfull and prompt service accounts company.

chez chez

03:30 21 Mar 21

After my long time accountant's retirement, I had to search for a new one and It was very hard while living overseas In the USA. I am so glad to find this firm.Brilliant CPA! Doesn't nickel and dime you if you simply have a quick question. Very personable and easy to talk to which I appreciate in anyone but especially an accountant! Truly professional and exceed my expectations.

Tim Sharp

22:50 05 Sep 21

Brilliant service from Stones Sharp. And no, I am not a relation of the Directors, just a coincidence. Without even being a Client of the firm - I was subleasing office space - they have proactively kept me up to date on email with all the job keeper programs. Hence, I am moving my business and personal tax requirements over to Stones Sharp.

Sam Gilmore

00:11 16 Dec 21

Shane and his team deliver a quality and professional service. I have recently come across to Stones Sharp based on a friends recommendation, and I couldn't be happier. Looking forward to continuing to work with Stones Sharp well into the future.