Can I renovate a residential property I own through an SMSF?

If you’re thinking of giving your property a total makeover using your self managed super fund (SMSF), think again. Unfortunately, while you and your fellow trustees have some control over your fund, it doesn’t mean you can spend your money however you like.

The ability to renovate a residential property that you own through an SMSF comes down to how you purchased it. Those who borrowed through their fund to buy the property are restricted in what they can do. Slight improvements and repairs can be made, but a full-blown renovation, sub-division or development is restricted to those who used the cash in their fund to buy the property and their SMSF deed allows it.

Those who borrowed through their SMSF aren’t entirely prohibited on making improvements on their property. Repairs and updates can be funded through an SMSF, but they can’t be vast alterations that change the inherent character of the property. If you did purchase a property with borrowed funds through your SMSF and want to make large changes, you may be able to borrow funds outside your SMSF.

Whether you’re renovating to repair with borrowed funds or doing a complete makeover with accessible cash, renovating through an SMSF is only worthwhile if it improves the return on your property. Not playing by the rules or accessing your SMSF prior to retirement for personal gain can result in hefty penalties with fines up to 40%. 

Speaking to a MFAA Accredited finance broker, who specialises in SMSF, can help determine whether it’s beneficial for you to renovate through an SMSF or to find an alternative.