An SMSF loan is a home loan used by a self-managed super fund (SMSF) to buy investment property. The returns on the investment – whether that’s rental income or capital gains – are funneled back into the super fund, increasing your retirement savings.

It’s worth noting rental income cannot be disposed of by a trustee or given as a pre-retirement benefit to a member of the fund – it can only be used to increase the retirement savings that will eventually be paid out to members once they retire.

Further, the property cannot be acquired from, lived in or (except in very limited circumstances) rented out to a fund member or any of their related parties.

SMSFs are able to buy both residential and commercial property – however it’s important to note that all investments need to be in the best interests of fund members and in accordance with the law. As such any property investment should have an income stream and realistic prospects for capital growth. Overall, an SMSF investment strategy needs to take into account the personal circumstances of all the fund members, including their age and risk tolerance and needs to consider:

• diversification (investing in a range of assets and asset classes)
• the liquidity of the fund’s assets (how easily they can be converted to cash to meet fund expenses)
• the fund’s ability to pay benefits (when members retire) and other costs it incurs
• the members’ needs and circumstances (for example, their age and retirement needs)