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Is It Possible to Buy a Rural Property with Your SMSF?

As the global pandemic persists, many people consider moving out of cities and starting their farms in rural areas. It’s not surprising to see people making such moves. After all, this COVID-19 pandemic has become a huge reset for most of us, so we can find things that truly make us happy and smile. If you feel the same, you’ve probably wondered how you can purchase a rural property with ease. Here’s some good news: you can buy a rural property with your SMSF or self-managed super fund.

But can I live on a farm I purchased through my SMSF?

That’s probably the question you have in mind right now. You’re probably aware you can’t buy a residential property using your SMSF. You can only do so for an investment property, as it can provide retirement funds or savings for you and the other members. So, how is it possible to buy a rural property with your SMSF, given that you’d likely live there as well?

It’s possible primarily because of a clause within the ATO rules on investment properties. Business real property means any building or vacant land used only for business purposes. You can live in a house within a purchased farm. That’s as long as it’s sitting on land of fewer than two hectares. Plus, the farm & the house can be leased to you, a fund member or related parties. That’ll help you remain within the rules of purchasing properties for business purposes.

How else can I ensure the farm meets SMSF rules?

talk to a financial expert if you want to buy a rural property with your SMSF

You might get too excited about living on a farm—and buying a rural property with your SMSF—and lose sight of the big picture. Make sure the real estate purchase meets ATO’s Sole Purpose Test. This test ensures any SMSF investment is for the sole purpose of providing retirement funds to the members and their dependents.

Here are other SMSF property rules you should remember:

  • The property purchased must not be previously owned by a fund member or related party.
  • A fund member or any related parties cannot live in or rent the purchased property to use it solely for private or domestic purposes.
  • A fund member or related party can lease a commercial property purchased within an SMSF. That’s as long as it’s for business purposes. And they must lease it at the current market rate.

Can I take out an SMSF loan to buy a rural property?

It’s possible to take out an SMSF loan to finance a farm purchase. But make sure this move suits your fund’s investment strategy. You may want to talk to SMSF loan experts. This way, you can ensure your fund’s overall investment goals align with your intentions to add real estate assets like a farm.

Embracing Farm Life is Possible

The bottom line here is raising livestock, building sheds, harvesting plants and embracing farm life are all possible with your SMSF. As long as you’re buying a farm to run a business, you can apply for SMSF loans and fund your move to rural areas. Don’t hesitate to consult with financial experts to ensure your purchase meets all the rules. That way, you don’t lose the benefits and tax concessions granted to SMSFs. 

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