What types of properties are not allowed under SMSF borrowing?

Property for redevelopment and resale

Property purchased for the purpose of redevelopment breaches the sole purpose test. This might be interpreted as the fund carrying on a property development business or engaging in a one-off profit-making undertaking, rather than solely providing for members’ retirement.

Your friend’s old house

An SMSF is generally not allowed to acquire assets from a member or an associate of a member. The word “associate” is very wide and includes many related parties.

A holiday home you intend to use or lend to a friend

Owning a holiday home you intend to use for private purposes, even just for one weekend every year, breaches the sole purpose test and in-house asset rule as you are now getting a current benefit from the asset and leasing an asset to a member or associate of the fund.

Overseas property

While your SMSF can technically invest in all types of property including property located overseas, getting funding to do it is virtually impossible. You will be hard-pressed to find Australian lenders who will finance an overseas investment or an overseas lender with the skills to navigate the complexities of Australian SMSFs.

The penalty for non-compliance can set you back as much as 46.5% of the entire value of your fund.

ARE YOUR READY TO INVEST?

If you have decided you want to purchase a property within you SMSF or would like to refinance an existing loan, please click the 'Start Here' button below, this will take you to our online Fact-find platform in which you can fill out your details.

We will connect with you within 1 business day to confirm and discuss the next steps.