SMSF audience guide
SMSF for property investors: LRBA, bare trust and the rules that matter
An SMSF is one of the few super structures that can hold direct property. Done right, it can be a tax-effective way to fund a residential investment, a commercial premises for your own business, or a long-hold development site. Done wrong, it's an audit problem and an ATO penalty. Here's how the structure actually works and what the rules require.
New FY kickoff — 50% off SMSF setup (limited time)
Limited-time new financial year offer — 50% off Individual and Corporate Trustee setup fees. Ends midnight AEST, 31 July 2026.
How SMSF property investing works
An SMSF can buy property outright or with a Limited Recourse Borrowing Arrangement (LRBA). With an LRBA, a separate bare trust is established to hold legal title to the property; the SMSF holds beneficial ownership and makes the loan repayments. The lender's recourse on default is limited to the property — the other SMSF assets are protected.
Residential property cannot be acquired from a related party (e.g. you can't sell your own investment property to your SMSF) and cannot be leased to a related party. Commercial property is more flexible: business real property — broadly, real estate used wholly and exclusively in one or more businesses — can be acquired from a related party and leased back, provided the rent is set at arm's-length commercial rates.
Whichever path you take, the property has to satisfy the sole-purpose test in section 62 of the SIS Act: the fund must be maintained for the sole purpose of providing retirement benefits. "Holiday house for the family" fails the sole-purpose test, even if it's also rented out — and the ATO is very willing to issue penalties on that breach.
- Hold residential or commercial property directly inside super
- LRBA for geared purchases — non-recourse lender, separate bare trust
- Business real property: acquire from related party + lease back at commercial rent
- Rental income and capital gains taxed at 15% in accumulation, 0% in retirement phase
- Sole-purpose test (s62 SIS Act) applies — no personal use allowed
- Specialist SMSF lender required — major banks have exited the market