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Can I renovate a residential property I own through an SMSF?

Property investment with your Self Managed Super Fund (SMSF) is something we can recommend. But can you renovate a residential property you own through an SMSF?
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Can I renovate a residential property I own through an SMSF?

Property investment with your Self Managed Super Fund (SMSF) is something we can recommend. But can you renovate a residential property you own through an SMSF?
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Unfortunately, while you and your fellow trustees have some control over your fund, there are some restrictions you need to be aware of.

Property purchased with SMSF

The ability to renovate a residential property that you own through an SMSF comes down to how you purchased it. Those who borrowed through their fund to buy the property are more restricted. Slight improvements and repairs are ok. But a full-blown renovation can only be done by those who used the cash in their fund to purchase the property.

If a property is purchased outright using the money in your fund then you are entitled to do whatever you like to the property, provided your deed allows you to do so. This could also include subdivisions or development.

Property purchased through SMSF loan

If you borrowed through your fund, you aren’t entirely prohibited from making improvements on that property. Repairs are allowed, but they can’t be significant alterations that change the inherent character of the property.  If you want to renovate your property, the best way would be by borrowing outside your super fund.

Whether you’re renovating to repair with borrowed funds or doing a complete makeover with accessible cash. Renovating through an SMSF is only worthwhile if it improves the return on your property exponentially. Not playing by the rules or accessing your SMSF prior to retirement for personal gain can result in hefty penalties with fines up to 40% of your fund value.

Want to know more about Self-Managed Super Funds? Click here to find out more!

To discuss whether it is beneficial to renovate through your SMSF or to find an alternative, contact the team at Rise High Financial Solutions and speak to one of our MFAA accredited brokers today.

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