Self-Managed Super Fund Meaning and How does it Work?

Self-Managed Super Fund Meaning and How does it Work?

Self-managed super funds are the best way to save when it’s time for your retirement. As the name implies, the funds and investments are self-managed, which means you or any other members can manage the investment strategy and comply with all tax and superannuation laws. The blog will share facts about SMSF in terms of home loans.

What Does Self-Managed Super Fund Mean?

Self-managed super fund home loans are for SMSF and its members to buy property as a long-term investment for their retirement savings. An SMSF can have 6 members that belong to the same family.

How Does an SMSF Home Loan Work?

An SMSF home loan lets you buy an investment property using funds in your self-managed super funds. Any capital gains or rental income from the property are reinvested, and you can access them at the time of retirement. Some conditions apply when you use SMSF to buy property. They are:

  • The property needs to be used only to offer retirement benefits to fund members.
  • The property must not be obtained from a related party of a member.
  • A fund member can’t live on the property.
  • A related party of the fund member or a fund member can’t rent the property.

How do You Buy a Property using Your SMSF?

Before you get started, it is suggested to seek help from a professional or you can get in touch with Star Homeloans. Legal professionals can help you plan your purchase and ensure the SMSF complies with all legal requirements. When you submit a home loan application, make sure to check every option carefully. Not all lenders provide SMSF home loans. You need to be extra careful when lodging the property loan documents and agreement, as you won’t be able to make changes to the terms of the loan once everything is finalised. Once your application is successful, the custodian will put the property as security with the lender. The loan is a limited recourse borrowing arrangement (LRBA) which means the lender is not liable for any other assets in the SMSF in case the loan defaults. You need to ensure the SMSF has sufficient money for repayments. If the property is rented out, the rental income must be used to pay off the loan. After paying off the loan, the legal title to the property will be given to the SMSF from the custodian.

Self-Managed Super Fund Benefits

  • Use property income to pay the loan

One of the most common benefits of an SMSF loan is that you will be able to use the property income to pay the loan. It means that you can keep the investment separate from other types of interest you may have.

  • Minimise your tax liability

In some cases, you can claim any interest costs on your loan as tax deductions by a self-managed super fund. It could reduce your tax liability, given that this is done according to the tax rules and regulations.

  • Add value to savings of your retirement

Some people use an SMSF loan for boosting their retirement savings. It can be achieved via borrowing within the fund and paying no tax on capital growth.

  • Get higher-value property

Based on how you gear your property investment, you can acquire higher-value property. You can seek help from one of our experts at Star Homeloans to help you determine what you must do to ensure this is the case.

How much can I Borrow with My Self-Managed Super Fund?

Generally, the lender will allow you to borrow 80% of the property’s value. Also, keep in mind that there are extra costs, including fees for a self-managed super fund set up and maintaining your SMSF and fees to buy an investment property. Various things need to be considered when investing in property using SMSF


The blog shares the meaning of SMSF, how it works along with the benefits of SMSF loans. If you are looking to buy a property using SMSF, you can seek help from one of our experts at Home Star Homeloans.

Seraphinite AcceleratorOptimized by Seraphinite Accelerator
Turns on site high speed to be attractive for people and search engines.