A growing number of Australians are curious about using their self-managed super fund (SMSF) to invest in property. But SMSFs are heavily regulated, and the rules are strict. This is not a shortcut. It’s a structured investment strategy that must be set up and managed correctly.
There is also a second option to buy property using superannuation, applicable to less buyers.
Option 1: Buying Through an SMSF
The property must meet the sole purpose test: providing retirement benefits to the SMSF’s members. That means you (or your relatives) can’t live in it, use it, or buy it from a related party… unless it’s commercial real estate. Even then, there are compliance rules to follow.
It’s at this point we turn to Diana Ramirez, Principal and Senior Financial Advisor at Franca Finance, for guidance on the rules.
“The sole purpose test is about making sure your SMSF investments are used only to provide for your retirement — not for today’s personal use,” explains Diana.
“For example, if your SMSF buys a residential property and rents it out to unrelated tenants at market rates, that’s fine — it’s helping build your retirement savings. But if you try to buy a holiday shack on the coast and stay there on weekends, or let your kids live in it while studying, that’s where the ATO says no,” she continues.
Diana often explains it simply: “You can own it, but you can’t use it — not until retirement.“
Borrowing inside super
If your SMSF is borrowing to buy property, it must be done through a limited recourse borrowing arrangement (LRBA). This structure limits the lender’s claim to the property itself if the fund defaults.
From a lending perspective:
- Deposits are higher — often 20–30% for residential, more for commercial.
- Servicing ratios are strict, because rental income and super contributions are the only income streams considered.
- The property must sit in a separate bare trust until the loan is repaid.
Not all lenders offer SMSF loans, and those that do have very specific criteria. That’s where we step in, helping clients understand what’s possible on the lending side, while working alongside accountants and licensed financial advisers who specialise in SMSFs.
The financial advice side
Diana explains, “to make property inside super worthwhile, your SMSF generally needs around $250,000 in combined member balances. This ensures there’s enough money to cover setup costs, ongoing administration, and property expenses without putting the fund at risk.”
“The SMSF’s trust deed also needs to specifically allow property investment, and the fund must have an investment strategy that supports the purchase. That strategy should consider diversification (not putting all your eggs in one basket), liquidity (having enough cash to pay ongoing expenses), and risk management,” cautions Diana.
Option 2: Boosting a Deposit Through the FHSSS
If an SMSF isn’t right for you, there is another way super can help — but it works very differently.
The First Home Super Saver Scheme (FHSSS) allows first home buyers to make voluntary contributions into their super fund and later withdraw them (within government caps) to boost their deposit. This doesn’t mean buying inside super; it’s about using super as a tax-effective savings vehicle before you buy your home in your own name.
“The First Home Super Saver Scheme is designed to help you build your deposit faster by letting you make extra contributions into super and then withdraw them later, up to a government-set limit. Because those contributions are usually taxed at just 15%, most people save more compared to putting the same money into a regular savings account,” clarifies Diana.
“For example, someone earning $90,000 who contributes $12,000 could end up around $3,000 better off in tax savings for that year. Over a few years, that difference can really add up and give your deposit a big boost. I often tell first-home buyers: ‘This is one of the few times the tax system gives you a leg-up — use it if you can.’”
Common Mistakes to Avoid
- Confusing SMSF property rules with FHSSS rules. They’re completely separate pathways.
- Trying to buy a home you (or family) intend to live in through an SMSF — it’s not allowed.
- Assuming topping up your retail/industry super fund gives you property access. It doesn’t, unless through FHSSS.
- Over-leveraging an SMSF so the fund can’t meet its obligations.
The Bottom Line
Using your super to buy property is possible — but it’s not simple, and it’s not for everyone. Whether through an SMSF or via the FHSSS, each path comes with strict rules and requires careful planning. Start with education, involve the right professionals, and make sure the structure supports your long-term goals.
Rebecca Morgan — My Mortgage Concierge
Rebecca works with clients and their advisers to ensure the lending side of SMSF property purchases is rock solid from the start. She coordinates with accountants and financial planners so every step meets the legal, lending, and retirement strategy requirements.
📞 Call Rebecca on 02 8014 4443 or visit mymortgageconcierge.com.au
Diana Ramirez — Franca Finance
At Franca Finance, we help busy professionals in their 40s, to 60s grow and protect their wealth with confidence. As a Principal & Senior Financial Adviser, I work closely with clients to make informed decisions about superannuation, investments, insurance, and retirement planning. Property often forms part of the bigger picture, and my role is to ensure that any strategy — whether buying inside super, building wealth outside super, or preparing for retirement — aligns with your long-term goals. My mission is simple: to give you clarity, confidence, and peace of mind with your finances.
Find out more and get in touch by visiting francafinance.com
