Common mistakes when buying an investment property in an SMSF–Tip 1

More and more investors, and particularly Baby Boomers, are using their Self-Managed Super Fund (SMSF) as a vehicle to buy an investment property.

So, I’d like to share some of the most common mistakes people are making so you can avoid them.


YourSelf-Managed Superannuation Fund(SMSF) can borrow money to:

a) Purchase a property (including all acquisition costs),
b) Pay for repairs and maintenance and
c) Capitalise interest.

Youcannotuse borrowed funds to improve the property.

Improvements include additions, granny flat, extensions, etc.

For these activities cash resources of the fund must be used.

It is critical to keep good records in your SMSF to identify whether borrowed funds or internal cash is used.

When debt is used, the property must be held in a Holding Trust with a Corporate Trustee and not directly in the SMSF.

Apart from the legislative requirement to not hold the property in the SMSF there are real and practical reasons why you would not want to hold it in the SMSF.

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Jason Gwerder
Tuesday, 27 April 2021

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