The process in detail
It is possible to purchase an off the plan property with an SMSF. Setting up a transaction like this requires careful planning to ensure the compliance with SMSF regulations.
What is the process for buying off the plan property in an SMSF?
The specifics that go into purchasing an off the plan property using an SMSF will include making sure that the proper procedures are in place.
Make sure the property is eligible.
For the property to be eligible for purchase in an SMSF, it has to pass the sole purpose test. The buyers must prove that the only purpose of the purchase is as an investment and not a residential property for any beneficiary of the trust or relative.
Since 10 August 2026, an SMSF can't take out a new loan (a limited recourse borrowing arrangement, or LRBA) to buy residential property. New SMSF loans can only be used for business real property. Loans already in place, refinancing of those loans and contracts exchanged before that date aren't affected. That includes an apartment or townhouse bought off the plan. For a new purchase, the fund must be able to pay the deposit now and the balance at settlement, which may be years away, from its own money.
Check the fund can pay
Off-the-plan purchases settle when the building is finished, often a year or more after signing. The fund needs the balance in cash on that date, plus stamp duty and costs, while still meeting its other obligations. A lawyer should check the contract's deposit, settlement and sunset terms against the fund's cash flow before the trustee signs.
Sign the contract
The contract must name the fund's trustee exactly, as trustee for the fund. A wrong buyer name can mean a second transfer and, in some states, stamp duty twice. If the fund borrows to buy business premises off the plan, a bare trustee holds the property, and the order in which the trust and the contract are signed matters.
Can an off the plan property be sold before settlement?
If the off the plan contract of sale permits on-selling, the property can be resold. Check with your legal and tax representatives before attempting to do this and if this is your plan discuss it with an expert before closing on the property. Some contracts won’t allow buyers to sell the property again until settlement occurs.
Reasons for selling a property before settlement include changes to liquidity in the SMSF that leave it unable to settle. A rising real estate market could also create an opportunity to quickly flip the property for a profit without having to wait for the construction to finish.
What are the risks associated with buying off the plan property in an SMSF?
The biggest risk is not having the money at settlement. The fund can't borrow for a residential purchase, and if it can't settle it can lose the deposit and be sued for the developer's losses. A lower final valuation doesn't reduce the price the fund has to pay.
Where a fund borrows to buy business premises off the plan, the land and the building must be one asset the fund acquires. Buying the land first and then borrowing to build doesn't work, because borrowed money can't be used to improve an asset the fund already owns.
What are the conveyancing costs for buying off the plan property?
Buyers and sellers need to be sure that they pay all the fees needed to cover the legal side of a property purchase. These costs can generally be split into two categories: legal fees and disbursements.
The legal fees are what the conveyancer or solicitor charges for doing the work. Legal fees will be between $500 and $1500 depending on the circumstances of the transaction.
Disbursements are the costs associated with third parties that charge for services like special searches. There could be disbursements costs for things like:
- Title searches
- Rates and owners corporation certificates
- PEXA
- Transfer fees
- Bank fees
Disbursements are usually between $200 and $500 depending on whether the property has an owners corporation.