Unfortunately, while you and your fellow trustees have some control over your fund, there are some restrictions you need to be aware of.
Property purchased with SMSF
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 more restricted. Slight improvements and repairs are ok. But a full-blown renovation can only be done by those who used the cash in their fund to purchase the property.
If a property is purchased outright using the money in your fund then you are entitled to do whatever you like to the property, provided your deed allows you to do so. This could also include subdivisions or development.
Property purchased through SMSF loan
If you borrowed through your fund, you aren’t entirely prohibited from making improvements on that property. Repairs are allowed, but they can’t be significant alterations that change the inherent character of the property. If you want to renovate your property, the best way would be by borrowing outside your super fund.
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 exponentially. 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% of your fund value.
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To discuss whether it is beneficial to renovate through your SMSF or to find an alternative, contact the team at Rise High Financial Solutions and speak to one of our MFAA accredited brokers today.
