Property in your SMSF: what trustees need to know
Buying property through your super fund can work well, but the rules are strict. Here is what trustees need to understand.
By Tash ·
Property is one of the most popular investments for SMSFs, and for some funds it works well. But property also comes with some of the strictest rules in super, and getting them wrong can be costly. This article explains what you need to know before your fund buys, holds or rents out property.
The fund must own it for investment, not for you to use
The first rule comes straight from the purpose of super: the property is an investment for your retirement, not a place for you or your family to use. You cannot live in a residential property your fund owns, you cannot holiday in it, and you cannot rent it to a family member to live in. Doing any of these breaks the rules, and it is one of the most common ways trustees get into trouble.
Residential versus business property
There is an important difference between residential and business property where people connected to you are concerned.
Residential property owned by the fund cannot be rented to you or your relatives at all. It can only be rented to genuine arm’s-length tenants, meaning people with no connection to you.
Business property, called business real property, is treated differently. If the property is used wholly and exclusively in a business, the fund can rent it to a business connected to you, for example the premises your own business operates from. But the rent must be at the full market rate and actually paid on time, and the arrangement must be properly documented. This is a genuine exception, but only for true business property on proper commercial terms.
You must value it every year
The property has to be shown at its market value at the end of each financial year, backed by real evidence. You cannot simply carry the same figure forward year after year without support. The evidence can include recent sales of similar properties, a council rates notice, or a valuation. Your auditor will want more than one source, and a quick estimate on its own is not enough. If the fund rents the property to a connected business, a formal valuation is generally expected.
Borrowing to buy property
A fund can borrow to buy property, but only through a specific and strictly controlled arrangement, and there are limits on what the borrowing can be used for. Borrowing inside super is complex and has its own rules, so it is covered separately.
There is also an important change coming. In June 2026 the government agreed to ban new borrowing to buy residential property inside an SMSF, expected to start around the middle of August 2026. From that date, a fund will not be able to take out a new loan to buy a residential property. Business property is not affected, so a fund can still borrow to buy genuine business premises. Existing loans are protected and stay in place, including if they are refinanced, and a contract signed before the start date is still allowed even if it settles later. Buying a residential property outright, without any borrowing, also remains allowed. Because the exact start date depends on when the change receives its final sign-off, check the current position before acting.
If your fund is considering borrowing, get proper advice before committing, because mistakes in the structure are hard and expensive to fix.
Property development carries extra risk
Some trustees want to develop property inside the fund. This is possible, but it attracts close attention from the regulator, because development often involves dealings with builders or entities connected to the members, and these can breach the rules if they are not on strictly commercial terms. If you are thinking about development, treat it as high risk and get advice first.
The bottom line
Property can be a good SMSF investment, but the rules are strict. The fund cannot let you or your family use a residential property, business property can only be rented to a connected party on full commercial terms, the property must be properly valued every year, and borrowing and development both carry extra rules and risk. Get advice before your fund takes any of these steps.
This article is general information for trustees and members. It is not financial, legal or tax advice about your particular situation. Consider getting advice from a licensed professional before making decisions about your fund.
Common questions
- Can I live in a residential property my SMSF owns?
- No. The property is an investment for your retirement, not a place for you or your family to use. You cannot live in it, holiday in it, or rent it to a relative to live in.
- Can my SMSF rent business property to my own business?
- Yes, in a genuine but limited way. If the property is business real property used wholly and exclusively in a business, the fund can rent it to a connected business, but the rent must be at full market rate, actually paid on time, and properly documented.
- Does my SMSF property need to be valued every year?
- Yes. The property must be shown at its market value at the end of each financial year, backed by real evidence such as recent sales of similar properties, a council rates notice, or a valuation. Carrying the same figure forward without support is not enough.
- Is SMSF borrowing to buy residential property changing?
- Yes. In June 2026 the government agreed to ban new borrowing to buy residential property inside an SMSF, expected to start around the middle of August 2026. Existing loans are protected, business property is not affected, and buying residential property outright without borrowing remains allowed.