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Real Property

You can invest in real property directly with your self managed super fund. A SMSF can invest up to 100% of the funds total assets in Real Property provided it is acquired at market value. Trustees must ensure that the level of investment in Real Property is in line with their fund’s investment strategy, including liquidity, diversification of assets, and maximisation of member returns in the fund.
Property can be of different types including:

  • Commercial - such as shops, retail outlets and office space
  • Industrial - such as factories and warehouses
  • Residential - such as houses and apartments

However for SMSF purposes property is differentiated into the following categories:

  • Business Real Property
  • Non Business Real Property

Business Real Property
Business real property generally means land and buildings used wholly and exclusively in one or more businesses. This type of property is treated concessionally under the SISA. For example business real property can be:

  • Acquired by an SMSF from a related party at market value
  • Leased from an SMSF to a related party at market rate of return

Non-Business Real Property
A self managed super fund can also invest in non-business real property, such as residential house/townhouse/apartment, land, rural property or holiday home.
It is important to note that any non-business real property can not be lent or leased to a related party of the fund (such as members, their family, and partners) if the value of the property is more than 5% of the total value of the fund’s assets. This is the case even if the related party were to pay market rent.

Consider an example: A self managed super fund has total assets of $1,000,000. One of the assets of the fund is a holiday home, valued at $200,000. The trustees of the fund want to pay market rent and stay in the house for 1 month over summer. However they can not do this as the value of the property is more than 5% (it is 20%) of the total value of the fund’s assets.