Example 4 – Investing in a property through a self-managed superannuation fund

This example is designed to help understand how to use PIA to analyse the scenario of buying an investment property in the name of a self-managed superannuation fund. However, since August 2026, SMSF’ generally cannot borrow to purchase residential property.

Property details:

Let us begin with the property described in Example 1. This was a new Queensland property (three bedroom brick residence on large block) that is for sale for $870,000 and is to be rented for $870 per week. Apart from standard rental management and letting fees, rental expenses will include rates ($2250), insurance ($1150), maintenance ($1200), pest control ($250) and other costs totalling $250. The original building construction cost was $430,000 and the purchase price includes $46,000 worth of fixtures and fittings. The purchase costs include normal State Government stamp duty and transfer fees and $1850 solicitor’s fees to cover the conveyancing.

Loan details:

There is no loan.

Investor details:

The investor’s annual salary was $125,000 per year, his spouse’s was $50,000 and they wish to purchase the property in the name of their Self-Managed Super Fund (SMSF) into which they make an annual contribution of $20,000 of their combined salaries.

What if:

The annual growth rate for the property was 5% and the annual inflation rate 3%.  

What are the steps?

1.      Open or create the spreadsheet from Example 1. Choose the investment analysis spreadsheet (Menu: View/Investment Analysis)..

2.      First we need the change the investor to that of the SMSF.  Open the Personal Details dialog (Menu: Investor/Personal Details), choose Super Fund as the Investor Type.  This will have the effect of changing the tax scale used for calculating tax credits to that specified under Superannuation in the Tax Scales dialog (Settings menu). It will also set home loan repayments and living expenses to zero as well as removing those parameters relating to a partner.  You will need to change the original figure for Investors salary/wages (85,000) to that relating to the fund (i.e. the fund contributions of 20,000).

If you have the PIAPro version, you can also type in “Self-managed Super Fund” in the Investor field.

4.      If we now bring up the SMSF Settings dialog (Settings menu/SMSF Options), we can see what other options we have available. Note that, for the Accumulation phase, it will already denote the fund income as 20,000 and the tax rate as that for Superannuation (15%). The plan was to possibly sell the property on reaching the Pension phase in 10 years (2036) so we must choose to Apply pension mode in 2036 at which time the Capital Gains Tax would be zero.



Now as we are interested in whether or not there will be sufficient cash in the SMSF to meet any shortfall, click the check box to display the Annual Cash Surplus at the bottom of the Investment Analysis spreadsheet.

5.     Loan amount: From the Investment Analysis spreadsheet click on “Loan amount” and in the dialog, set the cash invested for the property and purchase costs to the full amount in each case. The loan amount and loan costs should revert to zero in each case

 6.     The Investment Analysis Spreadsheet should now look like this...



Will there be sufficient cash in the SMSF to meet the short-fall?

The annual cash surplus is positive (29,469 in the first year) so there would be more than enough cash in the fund without having to service any shortfall. Click on the figures in the Annual cash surplus row to see how they are derived.

What if they sell the property on retirement?

Under current Australian tax rules, there would be no capital gains tax if the property were sold once the couple were in retirement mode.  Generate the Investment Analysis report (Menu: Report/Investment Analysis) which will reveal an equity after-sale of $1.371m at the end of 10 years, representing an after-sale return of 7.62%.

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