Investors ask: The limitations of SMSFs

Q. I keep hearing about all the restrictions around SMSFs and property, but I don’t really understand the rules. In simple terms, what are the biggest limitations of using an SMSF to purchase the property compared to buying it outside the fund? 

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A. When buying property through a self-managed super fund (SMSF), there are a lot of additional restrictions imposed on what you can and can’t do within that property – especially if you’re considering entering into any form of borrowing arrangement to purchase the property.

First and foremost, you cannot borrow any additional funds to finance renovations. You need to maintain the property through your own funds in the SMSF. So you need to consider the type of property you’re buying and the strategy you’re adopting moving forward to ensure if fits in with those regulations and the guidelines for SMSFs. 

Secondly, you need to ensure the property is purchased in the correct entity. Many people are making a big mistake when they’re going out to buy a property using their SMSF and they’re actually signing the contract with their SMSF details. If you’re considering borrowing to fund the purchase, you need to set up what’s called a ‘bare trust’ arrangement. A bare trust arrangement means that you actually hold the property in a separate vehicle to the SMSF.

If you buy the property using the SMSFs’ details initially, you need to transfer it out to the bare trust at a later date if you’re considering borrowing. If that does happen and you haven’t filled it out correctly initially, you may be subject to two lots of stamp duty.


There are a lot of obligations that you need to meet. There are a lot of restrictions. So you do need to do your homework and I would encourage you to seek professional advice in this area. The costs of going it alone may be very expensive if you do make some of those common mistakes.

Justin Beeton, founder and managing director, The SMSF Club 

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