Do understand what types of property your fund can own

An SMSF can own business property (such as offices, shops and factories) and residential investment property.

However, there are crucial differences between the legal requirements for funds regarding business and residential properties.

Business real estate is among the few types of assets that SMSFs are permitted to acquire from their members and other related parties.

And business real estate is one of the few types of assets that funds can lease to related parties – including fund members and their businesses – without a restriction on its value.

Generally, an SMSF is barred under the in-house asset rules in superannuation law from leasing or having investments with related parties involving assets that are worth more than 5% of the fund’s total market value.

Business property is among the few exceptions to the rule.

SMSFs are prohibited from acquiring residential real estate from related parties– even if the market value is paid.

An SMSF can be the sole owner of a property or hold a property with other investors, commonly using a unit trustor joint-ownership arrangement.

Some SMSFs enter arrangements to hold property with their own membersor with other SMSFs.

This enables the funds to invest in otherwise unaffordable properties.