Buying an investment property through Superannuation

The popularity of buying an investment property through Superannuation

It has become extremely popular to purchase an investment property through a Self-Managed Superannuation Fund (SMSF) however, this is not a strategy for all occasions.  Personally, I feel this strategy is being overused at the moment. Professionals such as financial advisors, accountants and property developers are all incentivised to recommend this approach because it is more lucrative for us.

Buying an investment property in general is a sound investment. In most cases, housing is a limited resource and demand is likely to continue to increase. Most people are comfortable with the risks associated with property and usually behave rationally when making investment decisions with property. The gearing benefit is attractive and features of our tax system (negative gearing deductions & capital gains discount) result in tax advantages.

Owning property through a SMSF however has some disadvantages and restrictions. Banks usually require much larger deposits and often require you to contribute around 40% of the purchase price. Interest rates for Self-Managed Super Funds are also higher.

Investment properties in an SMSF can’t be rented to a related party and can’t be occupied at a later date by the trustees. The idea of buying your dream house on the coast with the view to eventually move into it, is not option with property owned in SMSF.

Many are also unaware that properties owned by an SMSF can’t be improved. Maintenance is allowed, renovations are not allowed. This means you are unable to extend, put in a new kitchen or renovate the bathroom.

The exception to this is business real property. In this case, it is possible to rent to a related party and renovations are possible.  I actually advocate strongly for purchasing the premises a business operates from using Superannuation.

A further disadvantage of owning property through a SMSF is the cost.  The establishment of an SMSF is costly, and the ongoing accounting and financial planning costs are higher with a SMSF. My ongoing advice fee is for a SMSF is double the cost of 2 individuals with traditional super funds due to the increased work and responsibility.

Financial planners also see diversification as king; if the bulk of our Super assets are in an investment property we are overly reliant on a single asset. This is often magnified by the fact our other biggest asset is likely to be our family home, another residential property. All our assets are in a single investment class. I prefer a more diversified portfolio.


In my opinion, if you can, buy your investment property outside Super. This will provide you with greater flexibility, lower costs and allow you to borrow a higher percentage of the purchase cost.

Author; Alex McKenzie Categories: Author, Future Financial Services Blog

About the Author

Alex McKenzie

Alex McKenzie

Owner at Future Financial Services


  • Paraplanner at Zammit Partners Investments
  • Unit Trust Administrator at Colonial First State


  • University of Western Sydney
  • Penrith High


As a Financial Planner I help people to achieve what they would like in life. This involves helping you to identify the things in life they would like , developing plans to help achieve them and strategies to protect what you already have. We do this by providing Financial Advice to guide you through your life stages.

The financial planning process involves determining a clients current situation and financial objectives and tailoring strategies to assist in best achieving those objectives.

I am an expert in superannuation, investments and insurance, these are tools we use to help you achieve your goals.

I aim to use my knowledge of superannuation, taxation and Centrelink to efficiently use your assets and income to achieve your financial goals.

Retirement and pre-retirement planning, wealth creation, asset protection, insurance planning and estate planning are all areas of advice that I provide.

Leave a comment

You are commenting as guest.