SMSF Property Rules: What a Fund Can and Cannot Do

Six lines, published by the regulator, and hardly anyone reads them in one sitting. Generally your SMSF must not:

Underneath the six sits one sentence that explains all of them. 'No one associated with your SMSF should get a present-day benefit from its investments'. That's the sole purpose test in ordinary words. Every investment has to be made and kept for one job: paying members retirement benefits, or death benefits if a member dies before retirement.

The restrictions are the last item on a shorter list. Investments have to be in accordance with the fund's own trust deed as well as super law, and they have to meet the sole purpose test, be made on a commercial arm's length basis at true market value, show clear legal ownership by the fund, and meet the specific restrictions. That first part is worth a pause. The deed is a separate test sitting beside super law, and the ATO puts the two on the same line, so the fund's own document has to allow an investment before any of what follows matters.

Then the consequences. If you don't comply with the investment restrictions, the ATO says it may impose penalties, make the fund non-complying, disqualify you as a trustee, or prosecute trustees. A sole purpose breach also means the fund isn't eligible for tax concessions.

Most of what follows is already set out in full somewhere else on this site. Where that's true the section below says so, and the links at the foot of this page go there.

Borrowing is the line that moved recently: from 10 August 2026 a new limited recourse borrowing arrangement over real property can only acquire business real property, LRBAs aren't banned, arrangements entered before that date keep running, and a fund can still buy residential investment property outright with its own money. Our page on the 10 August 2026 borrowing change works through that in full, and the Queensland SMSF property page sets out what FAA does around a purchase. The rule that borrowed money can never be used to improve an asset didn't move, and the ATO's example of breaking it is building a house on vacant land the fund already owns.

It looks like the tidiest transaction in the world. Same person, same money, one title moving from a name to a fund. Nothing leaves the family.

Your SMSF can't acquire an asset from a related party unless the price reflects market value and the asset is a listed security, business real property, an in-house asset where the acquisition doesn't push in-house assets above 5% of total assets, or an asset that would be an in-house asset but is specifically excluded from being one. A rental house you own personally isn't on that list. Business real property is, which is the same term that now decides what a fund can borrow to buy, and it means land and buildings used wholly and exclusively in a business.

The word related party reaches much further than most readers assume. It covers all members of the fund, their relatives, their business partners, any spouse or child of those business partners, and any company or trust the member or their associates control or influence. It also covers standard employer-sponsors, meaning an employer contributing to the fund for a member, plus that employer's business partners, the companies and trusts they control, the companies and trusts that control them, and their relatives. Relative alone runs to a parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendant or adopted child of the member or their spouse, and the spouses of any of those.

The listed security limb is narrower than it sounds too. Crypto assets and private company shares aren't listed securities, so neither can be acquired from a related party.

Price is the other half of the rule and it's the half people forget. Where an asset isn't acquired or sold at arm's length, all or part of the income from the transaction may be non-arm's length income, taxed at the highest marginal rate. What that costs a fund is set out on our page about the money rules. Whether a particular person is a related party of a particular fund is a question with a real answer, and your accountant is who works it out.

The fund has money. You need money. It's your retirement savings, your name is on the trustee paperwork, and a short loan back to yourself feels like moving cash between two of your own pockets.

Your SMSF can't provide loans, or direct or indirect financial assistance, to a member or a member's relative. The ATO gives its own example of what indirect means, and it's the one people walk into: you can't use your SMSF as guarantor for a loan for a member or a member's relative. No money moves in that arrangement, which is exactly why it doesn't feel like a breach.

Loans the fund does make elsewhere carry three conditions. They have to be in the best interests of the members, comply with the fund's investment strategy, and be conducted on a commercial arm's length basis.

There's a wages version of the same idea. If a business is run through the SMSF, a member or a member's relative can't be overpaid for their services, and their salary or wage must not be higher than the standard salary for that type of role.

This is the one section of the page where the honest answer is short. FAA doesn't lend money. Anything about how a purchase gets funded belongs with a licensed credit adviser and your own SMSF specialist, and this page has nothing useful to add to it.

Everybody has heard you can't live in your fund's property. Almost nobody has heard why, so it gets filed as an arbitrary ban and treated as one, which is how people end up asking whether a week at Christmas counts.

ASIC's Moneysmart states the property version plainly. The property has to meet the sole purpose test of solely providing retirement benefits to fund members, it can't be acquired from a related party of a member, and it can't be lived in or rented by a fund member or a related party of a member.

The machinery underneath is the in-house asset rule. An asset of the fund that's leased to a related party is an in-house asset, and in-house assets can't exceed 5% of the market value of the fund's total assets. Read those two lines together and the tenancy question turns into arithmetic. The moment the fund leases the house to anyone connected to it, the property counts toward a cap set at a twentieth of everything the fund owns. Any lease has to be made on an arm's length basis and reflect market value as well.

Business real property leased between the fund and a related party is an exception to the cap, and some investments in related non-geared trusts or companies are too. Residential has no equivalent exception, so the arrangement that works for a business owner and the fund's premises fails for a member and the fund's house. Our page on SMSF commercial property is where that test gets unpacked.

Two more things sit in this rule. If in-house assets exceed 5% at the end of a financial year, trustees have to prepare a written plan to bring them back to 5% or below before the end of the following year, and then carry it out. And the in-house asset rules for assets owned before 11 August 1999 were defined differently, so a fund holding anything from before that date should review it against the current rules.

Holding the rule as a percentage makes it easier to carry around than holding it as a prohibition. Whether a particular tenant is a related party of a particular fund is a question about the fund, not about the property, so it sits with the trustee and the fund's accountant. FAA doesn't test that and has no way to.

A painting isn't a house, so a property page shouldn't need it. The reason it's here is that these rules are the clearest thing the ATO has ever published about what present-day benefit means, and every property question in this cluster turns on that phrase.

Artwork, boats, jewellery, vintage cars and wine are what the ATO calls collectables and personal use assets, and a fund holding them has to do it for genuine retirement purposes rather than any present-day benefit.

Then the specifics, and they're unusually physical. Collectables can't be used by or leased to a related party, and where they're leased to an unrelated party it has to be at arm's length. They can't be stored or displayed in the private residence of a related party, and the ATO spells out that this includes all parts of the land the residence sits on and all buildings on that land, such as garages or sheds. They can't be displayed in any other premises a related party owns, though they can be stored there provided they're not visible to clients and employees.

The paperwork is written down too. Trustees have to keep a written record of the reason for deciding where to store the assets. The items must be insured within 7 days of the fund acquiring them, with the fund listed as the owner and beneficiary of the policy. They can be sold to a related party, but only at market value as determined by a qualified, independent valuer.

The ATO uses the same idea as one of its three published examples of a sole purpose breach: the fund invests in collectables such as art or wine, and a trustee, member or related party displays or stores them in their private residence.

Read the garage rule and the property rule stops being mysterious. A shed counts. Visible to clients counts. The test is whether anyone connected to the fund got something out of the asset today rather than in retirement. A weekend in the fund's beach unit is that same test with a bigger asset.

It's a bookkeeping outcome, not a decision. A family trust resolves to pay the fund, the year ends, the money hasn't moved, and everybody involved thinks of it as a timing issue.

If your SMSF is entitled to a distribution from a related trust and you allow it to remain unpaid, you may contravene the in-house asset rules, the arm's length rule and the sole purpose test. One line item, three restrictions, and it happens without anybody buying or selling anything. The ATO points to its ruling SMSFR 2009/3 for the detail.

It's the clearest sign of how far these six rules overlap, and of how easily a fund falls through the join between them. Family trusts and unit trusts turn up constantly in the structures people bring to a property purchase, which is why this one belongs on a property page at all. Your accountant is who checks it, and it's checked in the accounts, not at the property.

Once someone learns their fund can own the building their business trades from, the next thought arrives on its own. If the fund can own the premises, why can't it own the business? Or renovate and resell a few properties, since that's a business too.

Running a business through an SMSF has to be allowed under the trust deed and operated for the sole purpose of providing retirement benefits for fund members. The rules governing SMSFs also prohibit or limit some activities other businesses take for granted, such as entering into credit arrangements or having overdrafts. The ATO's own instruction is to get professional advice before running a business through your SMSF.

It then publishes what draws its attention, which is rarer and more useful than a rule. The issues named are a trustee employing a family member, where the ATO looks at the stated rationale and the salary paid; a 'business' that's an activity commonly performed as a hobby or pastime; a business run by the fund with links to associated trading entities; and indications that the fund's business assets are available for the private use and benefit of the trustee or related parties.

Every rule on this page ends at somebody licensed, so here are the two doors the ATO itself points at. Get help from a licensed financial adviser or SMSF professional before making investment decisions. And where a specific transaction or arrangement is the question, you can request SMSF specific advice from the ATO about how superannuation law applies to it. Neither of those is FAA, and that's the point of saying them here.

FAA Property Pty Ltd is a licensed Queensland real estate agency, Office of Fair Trading licence 4220395, type real estate agent, current to 5 June 2027, and the number is checkable on the OFT register. One office: Suite 3-7, Level 5, Tower 2, 55 Plaza Parade, Maroochydore QLD 4558, phone (07) 5327 3469, email property@faa.net.au. No branch anywhere else.

A real estate licence isn't a financial services licence, and it authorises nobody to rule on a super fund. FAA isn't a buyer's agent, a financial adviser, a tax adviser or an SMSF compliance adviser. Not one restriction on this page is something FAA administers, checks or signs off.

What FAA does do is narrow and sits either side of the rules without ever being inside them. It sources new-build, house-and-land and off-market residential investment property across South East Queensland, models what a purchase would cost, connects clients with specialist SMSF accountants and solicitors, and manages residential rental property on the Sunshine Coast from that one office. Three of those are worth placing against the rules above.

Sourcing is residential, and for a fund buying outright with its own money. The related-party rule bites at the moment of acquisition, which is the moment sourcing touches, so who the seller is matters before the fund owns anything.

A cost model is arithmetic about a property, and it settles no question on this page. It doesn't test whether a seller is a related party, and it doesn't measure in-house assets.

Introductions are where the judgment goes. Every judgment call on this page belongs to a specialist SMSF accountant or solicitor, and the ATO says the same thing: get help from a licensed financial adviser or SMSF professional before making investment decisions.

One of the ATO's three published examples of a sole purpose breach is a member or related party receiving a personal reward when the fund's assets go into a particular investment group. Which makes this the right place to say who pays FAA, in its published wording:

FAA Property earns a commission from builders and developers when a property purchase proceeds. The strategy session itself costs you nothing. Because we're paid by the supply side, you should weigh our recommendations with that in mind.

Read that as disclosure. No FAA entity holds its own AFSL, and financial advice sits with other FAA Group companies, which are corporate authorised representatives of Lifespan Financial Planning Pty Ltd, AFSL 229892. FAA doesn't lend money. Nobody here can tell you whether your fund meets a single rule on this page, and anyone who says otherwise is selling you something.

The two doors named further up are the ones that open: a licensed adviser or SMSF professional, and the ATO's own specific advice request covering a particular transaction or arrangement. Neither of them is FAA.

What's left for FAA is narrow, and it starts only once a fund has already decided it wants a residential property it can buy outright. Sourcing one across South East Queensland, modelling what holding it would cost, and introductions to the specialists who rule on everything else. Book an SMSF Property Strategy Call for that conversation, and weigh it against the disclosure above.