Can I live in my SMSF Property when I retire?
Buying a residential property through an SMSF has become a popular option for superannuation fund members. If implemented appropriately, this strategy may offer members better control of their superannuation, potential tax efficiencies, and provides various benefits for those who are investment-savvy. But what happens to your SMSF property when you retire?
In this article, we give you a rundown of what you can do with your SMSF property at retirement.
During retirement: What happens to your SMSF property?
When you retire, you can generally continue keeping the SMSF property as an investment and do not need to sell or liquidate the property just because you’re retired or moving to a pension. Keep in mind you will still need to ensure your SMSF continues to meet its ongoing obligations, including having enough funds to support pension payments.
Superannuation rules and restrictions, such as the sole purpose test (to provide retirement benefits or pay death benefits), still apply to your SMSF property even after retirement. What you can and cannot do to the SMSF property stays relatively the same as long as there are no changes in the use of the property.
Can I live in my SMSF property when I retire?
You aren’t allowed to take up residence in the SMSF property if it’s still owned by the fund. This includes staying at the property even for the short term. If you want to live in the property bought by your SMSF, you’ll need to remove the property from the SMSF by transferring ownership.
Subject to strict ATO rules, these are some options you could consider:
- Purchase the property from the SMSF. This means you and other relevant members will have to buy the property at market value from the fund.
- In-specie transfer. If the SMSF Trust Deed allows it, the SMSF property will be transferred from the fund to the members. The property will become the members’ personal asset instead of an SMSF asset.
Each option has its own stamp duty and tax implications. Before deciding, it’s best to talk with a professional about the pros and cons of each option.
Buying a property from your SMSF
You and relevant members can purchase the property from your SMSF if you want to use it for personal reasons. You’ll need to get a property valuation to determine the market value and pay for the asset on an arm’s length basis. Doing so will not deplete your retirement savings. Essentially, you’ll be swapping assets from a property and turning it into cash.
When selling the SMSF property, the rules around buying assets through an SMSF don’t apply. SMSF properties can be sold to related parties if it’s at market value. This means more freedom for those who want to purchase a property that’s technically an SMSF asset.
In-specie transfer of property from SMSF to fund member
An in-specie transfer allows members to transfer the title of their SMSF property to the SMSF recipients directly upon retirement. Instead of cashing out the SMSF asset and having it distributed to the members, the ownership of the property is transferred.
Using an in-specie transfer to move a property out of the SMSF has certain perks. It allows members to avoid violating the sole purpose test. This lets you or other members live in the property because it’s no longer an SMSF asset. You may also be exempt from paying stamp duty on the in-specie transfer that comes with buying a property.
Make sure the SMSF Trust Deed allows for an in-specie transfer. This method of transfer is possible only if you meet certain conditions of release. Get in touch with a professional to see if you can access your superannuation.
When making an in-specie transfer, some requirements include:
- Standard transfer form
- Additional lump sum contribution form
- Pension application form
When doing an in-species transfer, make sure you follow SMSF rules and guidelines. Consult with an expert if you have any concerns to avoid potential penalties.
Interested in using your SMSF for a property? Contact us today!
See how much you can borrow on your SMSF home loan with our SMSF borrowing capacity calculator. Learn more about SMSF home loans and how they can help you achieve your retirement goals by getting in touch. Call 13 10 90 or schedule a meeting with our friendly lending specialists!
Disclaimer: The information provided in this article is general in nature and does not constitute financial or legal advice. Please seek independent professional advice tailored to your personal circumstances before making any financial decisions.
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