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Self Managed Super Funds

Common mistakes made when buying property in your SMSF

The ability to buy property in a Self Managed Super Fund, contrary to popular opinion, is not a recent event. Trustees and SMSF members have always been able to buy property via a SMSF, but what has changed in the past few years is the ability to now borrow money to do so. Prior to 2007 SMSF’s could not borrow money to buy property that it could not afford.


As a result of these changes not only has this led to a frenzy of activity in buying property in a SMSF, but the establishment of new SMSFs to do so has become flavor of the month in recent years.


ATO very concerned


Now that the ATO has had a few years to clarify to us what is allowed and what isn’t allowed when it comes to borrowing money to buy and maintain property in a SMSF, and has had the opportunity to review many SMSFs doing so, consequently the ATO has found some very concerning trends and issues.


The ATO has recently released a statement about areas of concern. Their general findings are that it appears people are investing in property with their SMSF without fully understanding their obligations under the law.


This is based on findings which have identified that some individuals setting up their own SMSF have been doing so with incorrect structures or borrowing arrangements.


The ATO is very concerned about the number of individuals who:




This has resulted in a number of SMSFs becoming non-compliant. Significant penalties have since been issued by the ATO for these breaches.


Like anything in life, people need to go into this type of complex and financially significant strategy with their eyes open. They need to seek appropriate independent advice to ensure that this type of investment strategy is implemented correctly and that the SMSF components required for this investment strategy are set up correctly so that the SMSF does not be deemed non-compliant, especially with something as important as the money a person hopes to retire with.


The complexities of SMSFs with borrowing arrangements cannot be understated. It is vital to get tax, legal and financial planning advice; and choosing one of these professionals to be the project manager for your SMSF to ensure that your fund is set up correctly and remains compliant at all times.


The ATO can impose harsh penalties for those who do not comply with the very strict rules governing what money borrowed through a SMSF and how it can be used. Getting the documentation wrong for the borrowing arrangements can lead to heart-ache and costly consequences. For example, make a mistake and you could end up paying double the stamp duty on an investment property, not to mention having to pay full tax on rental income instead of the maximum 15% that your SMSF should have been able to provide. So it is very important that you choose your Advisers wisely and do not ignore the fine print.


Common mistakes being made by Individuals


Some of the most common mistakes the ATO has identified that are being made by individuals setting up their own SMSF, and which have led to deeming their fund non-compliant and harsh penalties, include:








Buying property in a SMSF can be a very valuable strategy if it is implemented correctly and it is appropriate for your situation. At Baggetta & Co we have been providing advice on implementing Super and Property strategies for over six years and we have a great deal of experience in dealing with a diverse range of Super and Property transactions. If you are thinking about investing in property via a SMSF, invest some time and money to ensure that it is implemented correctly so you do not waste time and money, and risk your retirement funds.


Paul Baggetta, Founding Partner and Principal of Baggetta & Co, has been a Taxation Accountant for over 32 years, a Financial Planner since 1998 and in 1983 qualified as a Real Estate Licensee holding a Triennial Certificate (currently not trading), and operated his own Real Estate business for over 5 years as a second business.

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The information provided on this website, including the material and contents provided in the website publications, are informative in nature only and you should not act specifically on the basis of this information alone. It should not be used as a substitute for legal, business, accounting, tax, financial planning or other professional advice. If expert assistance is required, professional advice should be obtained. Liability limited by a scheme approved under Professional Standards Legislation

Paul Baggetta is the Founder & Principal of Baggetta & Co (ABN 68 786 233 813).

Paul Baggetta has been a Taxation Accountant since 1981, a Financial Planner since 1998, and in 1993 qualified as a Real Estate Licensee, holding a Triennial Certificate (currently not trading) and operated his own Real Estate business for property investment clients for over 5 years as a second business.

Financial planning services are provided by Paul Baggetta as an Authorised Representative (No. 261469) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. Australian Financial Services License No. 223135.


Taxation & Accounting services are provided by Paul Baggetta as a Registered Tax Agent (No.61487008) and is a Member of SMSF Association, FIPA & NTAA.