An SMSF Property Purchase, Handled by a Property Lawyer

Buying property inside a self managed super fund is an ordinary conveyance sitting on top of a superannuation structure. Both halves have to be right, and they have to be done in the correct order.

  • Contract reviewed and the purchaser named correctly before exchange
  • Bare trust and custodian in place at the right moment
  • Duty treated properly at purchase and on the later transfer
  • NSW, VIC, QLD and WA
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The short version

What a solicitor actually does on an SMSF purchase

A fund that borrows to buy property cannot hold that property in its own name. The asset is held by a separate custodian on a bare trust, and the fund holds the beneficial interest until the loan is repaid. That single fact drives almost everything else: who signs the contract, when the trust deed has to exist, how duty is assessed, and what has to happen years later when the loan is paid out.

A conveyancer can transfer the land. The parts that go wrong on SMSF files are usually not the transfer. They are the structure around it, the sequence, and the wording on the front page of the contract.

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Before exchange

6 things that have to line up first

Each of these is cheap to get right beforehand and expensive to correct afterwards.

The purchaser on the contract

The most common error: the contract names the fund, or the members personally, instead of the custodian in its capacity as trustee of the bare trust. Correcting it after exchange can mean a second lot of duty.

The order of events

Sequence matters: in most states the bare trust and the custodian company need to exist before contracts are exchanged. Establishing them afterwards is not always fixable.

Lender requirements

Every LRBA lender differs: some require their own form of holding trust deed, some will not lend on certain property types at all. The structure has to satisfy the lender you are actually using.

Your fund deed

Not every deed permits borrowing: the fund's own trust deed has to allow a limited recourse borrowing arrangement and allow the fund to hold the asset. Older deeds often do not.

One asset, not several

A borrowing arrangement covers a single acquirable asset: two separate titles, or a property intended to be subdivided, can break the arrangement or require separate structures.

The usual due diligence

The conveyance still has to be done: title, planning, strata records where relevant, and the contract itself. Fund structure does not remove any of the ordinary risk.

Not sure where your purchase sits?

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What your fund can buy

Residential and commercial are treated differently

The property type changes what is permitted, not just what is sensible.

Residential property

Arm's length only: your fund generally cannot buy a residential property from you, a member, or a relative, even at full market value. It also cannot be lived in or rented by a member or a related party at any point.

Commercial and business premises

The exception that matters: business real property, broadly premises used wholly and exclusively in a business, can be acquired from a related party at market value, and can be leased back to a member's own business on commercial terms. This is why so many SMSF purchases are commercial.

Whether a particular property qualifies as business real property is a question of fact about how it is used, not what it is called. Mixed use, a residence attached to a shop, or a partly vacant site are all worth checking before you commit.

Sequence

The order things have to happen in

Most expensive SMSF mistakes are timing mistakes, not judgement mistakes.

01

Confirm the fund can do it

Check the fund deed permits borrowing and that the investment strategy accommodates the purchase.

02

Settle finance in principle

The lender's requirements shape the structure, so they need to be known before documents are drawn.

03

Establish the custodian and bare trust

Incorporate the custodian company and prepare the holding trust deed, before exchange.

04

Review the contract, then exchange

The front page is checked, the purchaser is named correctly, and only then do contracts exchange.

05

Stamp where required

Duty on the deed and on the transfer is dealt with in the correct order for your state.

06

Settle and record it properly

Settlement proceeds, and the fund's records reflect that it holds the beneficial interest.

Already exchanged and unsure it was done right?

Have it checked

Later on

The transfer everyone forgets about

When the limited recourse loan is finally repaid, the property does not move into the fund by itself. The custodian has to transfer it, and that transfer has to be documented and lodged. Handled correctly, and where the state's requirements are met, it usually attracts only nominal duty, because the fund has held the beneficial interest throughout.

Handled poorly, or where the original documents did not properly identify the asset or the beneficial interest, the revenue office can treat it as a fresh dutiable transfer at full value. That is a problem created years earlier, at the bare trust stage, and discovered at the worst possible moment.

Transferring the property to your fund

What you are actually paying for

The contract is read properly

Special conditions, disclosure, and anything that conflicts with how the fund has to hold the asset.

Advice, not just processing

Whether the structure works is a legal question. A licensed conveyancer cannot advise you on it.

One firm for the whole arc

The bare trust, the purchase, and the transfer years later are handled by the people who set it up.

Duty exposure identified early

Sequencing and wording are checked against your state's requirements before anything is signed.

We work with your adviser

Your accountant and adviser handle tax and strategy. We do the legal work and coordinate rather than duplicate.

Problems found before exchange

Almost every SMSF problem we see was cheap to prevent and expensive to unwind afterwards.

Explore:

The rest of the SMSF work sits across these pages.

SMSF property law services Bare trust and custodian setup SMSF conveyancing Bare trust to SMSF transfer Independent legal advice certificates Fixed fees

Questions we get asked

Can my SMSF buy a property from me?
Generally not, if it is residential. A fund cannot acquire residential property from a member or a relative, even at market value. The main exception is business real property, broadly premises used wholly and exclusively in a business, which can be acquired from a related party at market value. Whether a specific property qualifies depends on how it is actually used.
Do I need the bare trust before I sign the contract?
In most cases yes. In the majority of states the custodian and the holding trust need to be in place before contracts are exchanged, and the contract needs to name the custodian correctly. Establishing the structure after exchange can trigger a second assessment of duty, and is not always able to be corrected.
Can my fund borrow to build or renovate?
Borrowed money under a limited recourse arrangement can be used to repair or maintain the asset but not to improve it, and the asset cannot be changed into something different from what was acquired. This is why house and land packages and off the plan purchases are difficult inside a borrowing fund, and need to be assessed before you commit.
What happens when the loan is repaid?
The custodian transfers the property to the fund. Because the fund has held the beneficial interest all along, that transfer usually attracts only nominal duty where the state's requirements are met and the original documents were prepared correctly. It does not happen automatically, and it does need to be documented and lodged.
Can you act if my fund is not borrowing at all?
Yes. If the fund is buying outright there is no limited recourse borrowing arrangement and no bare trust, and the fund can hold the property directly. The conveyancing and the related party rules still apply, and the purchaser still has to be named correctly.
Which states do you act in?
NSW, VIC, QLD and WA. The superannuation rules are federal, but duty, stamping and the timing of when the trust deed has to exist are state based, so the sequence differs depending on where the property is.

Before you sign anything

Send us the contract and tell us how the fund is set up. We will tell you what has to happen, in what order, and what it will cost.

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