What can my SMSF invest in?
The benefits of having a SMSF is you have the power to make the investment decisions. You have freedom to select investments that you think will benefit the SMSF members.
Investments must be made for the purpose of providing retirement benefits for the members of the fund.
Members, relatives or associates of the trustees must not gain any immediate benefit from the fund’s assets or activities.
So, for example, any property owned by the fund cannot be used by the members or their families, even if rented out at a market rental.
The most common types of investments founds in SMSF’s include:
- Cash management accounts.
- Term deposits. Managed funds (Australian and international).
- Listed Australian shares.
- Listed unit trusts (property, investment).
- Listed investment companies.
- Overseas listed shares.
- Residential property.
- Commercial property.
- Industrial property.
- Property purchased with borrowed funds (limited recourse borrowing).
- Property partnerships with non-related parties.
- Shares in private companies with non-related parties.
- Options, warrants, CFDs and other “exotic” investments – these assets are permissible with the proper investment strategy.
There are some investments that are strictly prohibited inside a SMSF. Your SMSF cant;
• Cannot lend money or provide any financial advantage to a member, a relative or associate of a member.
• Cannot borrow except in limited circumstances.
• Must limit investments in, or loans to, ‘related parties’ to 5% of the market value of the fund.
• Cannot buy assets from a member or a relative or associate of a member except for business real property. The exemption for off-market transfers of listed securities and widely held managed funds no longer applies. The new rules state that where a market exists, the purchases must be made on market.
If you’re unsure what your SMSF can and can’t do then please feel free to call;
Cayle Petritsch
SMSF Specialist Advisor
T: 02 9984 7774
E: caylep@nac.com.au
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@nac.com.au
“An SMSF offers wide investment choice, but every decision must meet strict superannuation rules.”
About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
SMSFs Offer Broad Investment Flexibility
Trustees have more control and choice compared to other super funds.
Compliance Comes First
All investments must meet superannuation laws, including the sole purpose test.
Strategy Drives Decisions
Investments should align with the SMSF’s documented investment strategy and member goals.
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On-Boarding Process
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Frequently Asked Questions
What types of assets can an SMSF invest in?
SMSFs can invest in a broad range of assets including shares, property, managed funds, cash, fixed interest and certain alternative investments, provided they meet compliance rules.
Are there any investments SMSFs are not allowed to make?
Yes. SMSFs cannot invest in assets that breach the sole purpose test, involve personal use, or are acquired from related parties unless an exception applies.
Can my SMSF invest in property?
Yes. SMSFs can invest in residential or commercial property, but residential property cannot be lived in by members or related parties.
What is the sole purpose test?
The sole purpose test requires SMSFs to operate solely to provide retirement benefits to members, not present-day personal benefits.
Do SMSF investments need to follow a strategy?
Yes. All SMSF investments must align with the fund’s documented investment strategy, including risk, diversification and liquidity considerations.
What are the most common investments people actually hold inside an SMSF?”
Most SMSFs invest in more traditional assets like shares, property, managed investments, cash, and fixed interest, as long as those investments fit within the fund’s rules and purpose.
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