How to use your SMSF to build wealth

For many Australians, setting up a self-managed super fund (SMSF) offers greater control and can be a smart way to build long-term wealth through property.

While managing your own super isn’t for everyone, it can be a powerful tool when paired with a clear investment strategy and the proper professional support.

What is an SMSF and how does it work?

An SMSF is a private super fund that you manage yourself. Its primary purpose is to provide retirement benefits for its members. As an SMSF trustee, you are responsible for ensuring the fund complies with superannuation and taxation laws and that all investments are made solely to benefit the members’ retirement. This responsibility includes maintaining records, arranging annual audits and lodging returns with the Australian Taxation Office (ATO).

Unlike industry or retail super funds, an SMSF gives you greater control over where your retirement savings are invested. This includes the option to invest in direct property, provided the purchase meets strict rules set out by the ATO.

Using an SMSF to invest in property

A common investment strategy for SMSFs is to invest in residential or commercial property. This approach has gained popularity in recent years, with an increasing number of trustees opting to purchase direct property assets. According to the ATO, the value of SMSF asset allocation in residential property has grown 47.7% over the five years to the March 2025 quarter. Similarly, investment in commercial property has grown 48.6%.

Using your SMSF to invest in property can help diversify your wealth portfolio while also gaining both long-term capital growth and rental income.

However, there are strict rules that an SMSF property investment must follow. The property must be purchased solely to benefit the fund members’ retirement (the “sole purpose” test). 

Members or family of members may not live in the property. In the case of a commercial property, business owners may be able to lease the property back to their own business, provided it is done at market rates and under a formal lease agreement. It is also important to note that you generally cannot acquire a residential property from a related party. 

SMSFs can access a mortgage to make a property purchase. This is done through a limited recourse borrowing arrangement (LRBA). Under an LRBA, the loan is secured only against the property being purchased, meaning other assets in your SMSF are protected if the loan can’t be repaid.

Advantages of buying property with your SMSF

Buying property through your SMSF can offer a range of benefits that support long-term wealth creation and retirement planning. Some key advantages include:

Tax benefits

Rental income earned by the SMSF is taxed at a concessional rate of 15%. If the property is held for more than 12 months, the capital gains tax is reduced to 10%. Once you retire and your SMSF enters the pension phase, both income and capital gains may be tax-free.

Asset protection

Property held within an SMSF is generally protected from personal creditors, providing peace of mind in the event of financial hardship outside the fund.

Business use

SMSFs can purchase commercial property and lease it to a related business. This allows members to pay the rent on their business premises back into their super. 

Diversification

Property can provide diversification from shares, cash and other traditional superannuation investments, helping to spread risk.

Long-term capital growth

A well-chosen property in the right location can deliver consistent growth over time, supporting a more comfortable retirement.

What to consider before investing in property through your SMSF

Using your SMSF to buy property is not without risks. The setup and ongoing costs can be high, and the fund must have sufficient liquidity to meet ongoing expenses, such as property holding costs, insurance, and compliance requirements. 

Property is an illiquid asset, meaning it can be difficult to sell quickly if you need access to funds. Market fluctuations can also impact the value of your investment, and there is no guarantee of rental income or capital growth. 

Before proceeding, it’s essential to seek advice from a qualified financial adviser, accountant, and property investment strategist, such as SAFORE. We can help you determine whether SMSF property investment suits your goals and identify quality properties that align with your long-term strategy. 

Thinking about using your SMSF to invest in property?

At SAFORE, we help trustees turn superannuation into a powerful wealth-building tool. By identifying compliant, high-quality opportunities, we align property investments with your long-term retirement goals.

Call 1300 69 77 67 or book a discovery call today to see how our strategy-first approach can give you confidence in your SMSF decisions.