Today, we’re speaking with Ryan Pinkerton, Manager and SMSF Specialist at Roberts + Morrow, about a topic that’s becoming increasingly important for families. After all, your parents probably bought an investment property with a Self-Managed Super Fund – here’s what you need to know about long-term planning for properties held with a SMSF.
This community story is proudly brought to you in partnership with Roberts + Morrow.
For thousands of Australians, purchasing property within an SMSF 15 or 20 years ago made perfect sense. It offered control, flexibility, and attractive tax benefits. But as time passes and families prepare for retirement or succession, those same structures can become complex and, at times, restrictive.
This is something Ryan Pinkerton, Manager and SMSF Specialist at Roberts + Morrow, understands more than most. Based in Armidale, Ryan helps families and business owners navigate the evolving world of superannuation, property, and estate planning. “It’s a really powerful structure,” he says, “but only if you understand how it fits into your bigger picture, and how to eventually get the property back out again.”
From a tax tool to a family legacy
When self-managed super funds first gained popularity in the 90s, the appeal was that people could have more control of their assets. They wanted the flexibility to choose how their money was invested, especially in the early 2000s after the dot-com crash and before the GFC shook confidence in the share market.
Things really took off in 2007 when the rules changed to allow SMSFs to borrow money to buy property through what’s called a Limited Recourse Borrowing Arrangement, or LRBA. That shift opened the door for a lot of people. Suddenly, you could buy property through your fund and use debt to help build your retirement savings.
The concessional tax environment added to the appeal, 15 per cent in the accumulation phase and zero per cent once you’re in the pension phase. For business owners, there was another advantage: you could own your premises through Super and lease it back to your own business. That rent becomes a tax deduction for the business, but it’s only taxed at 15 per cent in the fund. It keeps the money in your family group and builds a long-term retirement asset at the same time.
The hidden complexities of property in super
One of the biggest misconceptions about SMSFs is that once you buy the property, you can just forget about it. It doesn’t work like that. You need to review your investment strategy every year, and especially when big life changes happen. Getting married, having kids, planning for retirement – they all affect your fund. The rules and legislation also change, which means your strategy may need to change too.
Every SMSF also has to meet what’s called the Sole Purpose Test, meaning it exists purely to provide retirement benefits. That’s easy to forget when you’re also a business owner leasing your own property. You have to make sure you’re keeping on top of the admin: proper lease agreements, paying market rent, and getting independent valuations done regularly to make sure everything stacks up.
Then there’s cash flow. When you move into the pension phase, the fund has to pay out a minimum pension to its members each year. If most of your fund’s value is tied up in property, that can create extra pressure. You still have to pay rates, maintenance, land tax, insurance – all ongoing costs – and make sure the fund can meet its pension obligations at the same time.
Thinking ahead: inheritance and exit planning
Over the next 20 years, about $3.5 trillion in wealth will be passed down from one generation to the next in Australia, and a big portion of that sits inside SMSFs. So for families where Mum and Dad bought property through their fund 15 or 20 years ago, the question now is: what happens next? That’s where things can get tricky. If the property is sold or transferred when the fund isn’t in the pension phase, it can trigger capital gains tax of up to 15 per cent. Then, when children inherit, they may have to pay 15 per cent in death benefits tax on the taxed portion of the fund. That tax has to be paid in cash, which is fine if there’s cash available, but if the only asset is property, the family might be forced to sell it just to cover the tax bill.
And that’s before you even get into the family dynamics. If you’ve got one child who wants to keep the property, and two or three others who want to sell, that can turn into conflict really quickly. You can’t exactly divide a property four ways, and often, the child who wants to keep it might not have the capital to pay the others out. This is why we talk a lot about planning your exit early. Most people focus on getting property into Super because of the tax benefits, but they don’t think about how they’ll eventually get it out. Having that conversation early, and getting everyone on the same page, makes a huge difference.
Why working together matters
One of the most common issues I see when advisers work in isolation is that you might have a solicitor drafting an estate plan that says the property will go to the kids, but the accountant sets up the pension to automatically revert to the spouse. If no one’s talking, those documents can very easily contradict each other.
At Roberts + Morrow, the difference is that all those conversations happen under one roof. I can walk down the hall and talk to the legal team or the financial planners, and we can look at the full picture together. If a client passes away, we can work out the best approach for the surviving spouse, whether that’s winding up the fund early, transferring the property, or taking money out to minimise tax for the family. That kind of integration doesn’t just save time, it also saves stress. When families are already dealing with grief, the last thing they need is to be chasing five different advisers or trying to untangle conflicting documents.
The full life cycle approach
What we do at Roberts + Morrow is help clients through the entire life cycle of the SMSF, from setup to management, to exit. We make sure the structure works, the compliance is right, and the long-term plan is clear.
If you want the benefits of property in super, that’s great, but you’ve got to play by the rules and think about the end game. Plan early, get the right advice, and make sure the decisions you make today will still make sense for your family in twenty years’ time. That’s how you keep control, minimise tax, and protect relationships for the next generation.
Ready to take the next step?
If your family holds property in an SMSF, or you’re considering one, now’s the time to review your strategy. The team at Roberts + Morrow can help you future-proof your super, plan for succession, and make confident long-term decisions. Visit their website to learn more or get in touch with Ryan and the SMSF team.
Meg Miller
Digital Marketing Manager. Adventure seeking writer, free spirit, smitten aunt and dog mum.
