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Buying residential property with an SMSF is quite a popular decision for investors, the only major restriction being that you don’t buy the property from a related party of a member.
For example, you can’t purchase your family home through your SMSF. You also cannot rent a residential property that is owned by your SMSF, nor can you lease that to another fund member, or to their related parties.
You can only buy an investment property with your SMSF that you then lease to tenants who are not currently fund members or relatives of fund members.
Your SMSF can also purchase commercial property. This is where it becomes very beneficial for small business owners, you can actually purchase your own business premises, through your SMSF. This is very lucrative for business owners as it allows, for example, a local GP or dentist to purchase their business premises and have their business pay rent to their own SMSF (which owns the property).
It is important to remember that the property still strictly needs to meet the sole-purpose test of providing retirement benefits to its members. However when dealing with purchasing commercial property through an SMSF, an SMSF can generally buy the property and rent it back to a SMSF member or a related party of the fund – including the member’s business or company.
Every part of the sale and lease of the commercial property must be commercially viable. To ensure your fund remains compliant, an arm’s length sale price and lease arrangement is especially important when acquiring and/or leasing property to a member or related party of the fund.
We recommend that you speak with an MRD financial adviser to help you navigate the advice, compliance and paperwork needed to facilitate any asset purchase with your SMSF.