INVESTING

Can I renovate a house owned in a SMSF?

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The short answer is yes. However, there are many rules and traps to watch out for if you are considering such a project.

Renovation, payments for materials and labour generally can only be made by the fund and not by the fund member or a related party.

If any of the labour is carried out by the fund member or a related party (for example, the fund member or their relative is a builder), this must be authorised by the trust deed. Furthermore, these people should have the appropriate skills to carry out the work and they would need to be paid a commercial rate for their services.

renovate a smsf property

Finally, the financial aspect of such a project may not be suitable for an SMSF, given that such a project may require a lot of capital. Remember, fund members are limited under the super rules as to how much they are able to contribute annually to their fund.

Furthermore, if the property is acquired by the fund with borrowings under a limited recourse arrangement, then the rules do not allow further borrowings to finance the cost of the renovations. Under this scenario, the renovations would need to be financed by the SMSF's existing funds, or by additional contributions made by the fund members.

Andrew Yee, director, superannuation, HLB Mann Judd

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Stephen Graham
April 22, 2016 4.01pm

Short concise answer that addresses the major issues. What if the fund member is a builder, and uses funds from the SMSF to pay himself for labour and materials, and then contributes these payments as super contributions? On the surface, that chould pose an issue...
Thoughts?

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