• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

SMSF Loan Experts

It's not complicated when it's done right
Speak to one of our SMSF Loan specialists today 1300 781 680
  • Call 1300 781 680
  • Home
  • Is This You?
    • I Don’t Have An SMSF, but I’d Like One
    • I Have A SMSF Already
  • How We Help
    • Residential SMSF Loans
    • Commercial SMSF Loans
    • SMSF Setup
    • SMSF Refinance
    • SMSF Lending Strategy
    • Bad Credit SMSF Loans
    • NDIS Property Investment
    • One-part contract
  • Client Reviews
  • FAQs
  • News
  • About
  • Enquire Now
You are here: Home / SMSF Property Investment / Common Mistakes To Avoid When Making Improvements To Your SMSF Property

8 years ago, we saw the need in a growing market for lending experts who specialise in SMSF. Our team now combines years of experience through every aspect of self-managed super funds. Together, we organise more limited recourse borrowing arrangements (LRBA or SMSF loans) in a week than most other brokers or bank branches in a year. Here we share some of our insights as well as SMSF news with you.

Our expertise has been sought by and seen in Australian Broker, the Herald Sun, Money and Mamamia.

Make sure you get the right SMSF lending advice. Send us a message or call SMSF Loan Experts on 1300 781 680.

Improvements To SMSF Property

Common Mistakes To Avoid When Making Improvements To Your SMSF Property

February 22, 2021 By Yannick Ieko

If you’re wondering if you can renovate your SMSF investment property, the short answer is ‘maybe’. The long answer depends on a few different factors, including what type of renovation you’re looking to do and the source of your funds. Choose your scenario below for more details on renovating your property.

Your self-managed super fund purchased the property without needing a loan

If the purchase of your SMSF property was made entirely without the help of a mortgage, you are free to make whatever changes you’d like! This, of course, is subject to what is stated in your SMSF deed. If the deed allows it, and you have the cash on hand to spend, you are free to bulldoze, renovate, develop or sub-divide to your heart’s content without breaking any SMSF property rules!

You purchased the property with an SMSF loan and want to make improvements

Due to the rules surrounding limited recourse borrowing arrangements (LRBA), an SMSF that has purchased a property using an SMSF loan (an LRBA) is prohibited from borrowing funds to improve the asset. While the SMSF is unable to borrow to make improvements, it is possible to use other sources of funds, such as the cash reserve or even money from the members of the SMSF. If an improvement is to be funded by the SMSF members, it’s important to remember that the value of the improvement counts toward the contributions cap.

While improvements are allowed if your fund can cover the costs itself, there is a limit to the changes that can be made to an asset purchased under a limited recourse borrowing arrangement. A single asset purchased under an LRBA can be improved as long as the costs are not covered by borrowing. And, any improvements made to the acquirable asset must not result in it becoming a different asset.

For example, if you purchase a residential building under an LRBA and want to make improvements to the building so it can be used for commercial purposes, the asset would be fundamentally changed. It would contravene the SIS Act — regardless of where the money came from for the renovation.

When figuring out what constitutes a fundamental change in the asset, there are some factors to consider. These factors indicate an asset has been changed and therefore goes against superannuation legislation:

  • There is no longer a single acquirable asset.
  • The improvement has significantly changed the function of the asset.
  • Another asset has entirely replaced the original asset.

You purchased the investment with an SMSF property loan and need to make repairs

It’s reasonable to assume that a property is going to need some kind of repairs as it goes through general wear and tear, so fixing up SMSF investment properties is looked at completely differently to renovations or improvements. If you are restoring your property without changing its character, it’s possible to use borrowed monies to cover the cost of the repair without breaching any arrangement or legislation.

Check the definitions before you jump into repairing or renovating your SMSF investment property

The rules and regulations surrounding self-managed super funds are complex and confusing. If you are thinking about renovating or repairing your SMSF property, we’d love to chat with you to make sure you’re not breaching any rules. Take advantage of our free SMSF finance session.

Filed Under: SMSF Loans, SMSF Property Investment

Primary Sidebar

Get in Touch

Have a question about SMSF Lending that you'd like answered? We'd love to hear from you. Send us a message or call us directly on 1300 781 680.







    Please send me important SMSF updates.

    Featured On

    Financial Review
    Business Acumen Magazine

    seven network logo
    Talking business podcast

    Australian Property Investor
    your life choices

    ultra 106five

    Recent Posts

    housing-increase

    What Does the Housing Price Increase Mean for the Future?

    There has been a residential property price boom across Australia over the last 12 to 18 months. According to the latest figures from the Australian Bureau of Statistics, Australian property prices grew by a whopping 23.7% in 2021. This is the third-largest annual increase on record. The highest was in 1950 when prices doubled after […]

    super-splitting

    How Your Relationship Status Can Affect Your SMSF

    If you have a self-managed super fund (SMSF), it’s important to understand the impact a relationship breakdown can have on your assets. Superannuation assets are considered to be property under the provisions of the Family Law Act, but they are treated differently from other assets. SMSF and divorce Unlike most other types of assets, super […]

    Your Questions

    Do you have a topic or question around SMSF Lending you'd like us to write about? You can simply send us a message letting us know what you'd like to hear from us on, and we'll do our best to address your question or topic in our upcoming posts.







    Download Our Investing in Property Inside an SMSF Guide

    The ultimate guide for anyone thinking about buying
    property inside their super fund including:
    The basics,
    the technical aspects,
    case study &
    how we help

    Marketing by



    ActiveCampaign

    Footer

    Quick Find Index

    SMSF Property Loans
    SMSF Commercial Loans
    Limited Recourse Borrowing Arrangements – LRBA
    Which Banks Give Loans To SMSF
    SMSF Setup
    Blog
    Sitemap

    Sydney | Melbourne

    Melbourne Office

    Suite 2, 54 Davis Avenue
    South Yarra VICTORIA 314

    1300 781 680

    Featured On

    Financial Review
    Business Acumen Magazine
    seven network logo
    Common Mistakes To Avoid When Making Improvements To Your SMSF Property
    Australian Property Investor

    YYJ Pty Ltd, ABN 20 119 205 999, T/A smsfloanexperts.com.au Australian Credit Licence: 530508. Copyright © 2022 smsfloanexperts.com.au | Privacy | Website Design by Matt Angel
    • Call 1300 781 680
    • Home
    • Is This You?
      • I Don’t Have An SMSF, but I’d Like One
      • I Have A SMSF Already
      • Back
    • How We Help
      • Residential SMSF Loans
      • Commercial SMSF Loans
      • SMSF Setup
      • SMSF Refinance
      • SMSF Lending Strategy
      • Bad Credit SMSF Loans
      • NDIS Property Investment
      • One-part contract
      • Back
    • Client Reviews
    • FAQs
    • News
    • About
    • Enquire Now