Buying Property with Your SMSF in Victoria: The Complete Conveyancing and Compliance Guide

It’s a familiar Melbourne scene. You’ve spent a Saturday morning drifting between open homes in Brunswick or Preston, juggling a coffee in one hand and a brochure in the other, and you start thinking: ‘If my self managed super fund has enough money, could the SMSF buy a place like this?’

The short answer is yes, an SMSF can buy property in Victoria. The longer answer is the one that matters, because SMSF property comes with tight rules about who can use the property, who you can buy from, how you pay for it, and how the paperwork has to be set up from the start. It’s not hard to do properly, but it’s easy to get caught by something that feels minor in a normal purchase.

This guide is general information for Melbourne buyers and investors. It’s not personal advice. If you’re planning an SMSF purchase, it’s worth getting your conveyancer and SMSF accountant working together early so the structure, contract and settlement all line up.

The quick answer, with the fine print kept human

Your SMSF can buy an investment property in Victoria if:

• the purchase is genuinely for retirement benefits (not for you, your partner, your kids, or anyone connected to the fund to use now)

• the deal is on market terms and at market value

• you’re not buying residential property from a member or a related party

• the fund’s governing rules and investment strategy allow property, and you can show the decision makes sense for the fund

• the buyer name and ownership structure are correct on the contract, especially if borrowing is involved

Break these rules and you don’t just ‘lose a bit of flexibility’. You can face heavy tax outcomes, administrative penalties, and loss of the fund’s concessional treatment. That’s why getting the conveyancing and compliance right is the real investment.

Two sets of rules at once: SMSF compliance and Victorian conveyancing

An SMSF property purchase sits in the overlap of:

• Federal SMSF obligations (how the fund must invest, deal with related parties, and avoid giving members present day benefits), and

• Victorian property law and process (contracts, Section 32 vendor statements, title checks, duty, settlement, and registration)

Think of it like driving through the CBD in peak hour. You’re watching your lane, the tram lines, pedestrians, and the traffic lights. Miss one thing and your day goes sideways.

For SMSF buyers, the biggest stress points tend to be:

• auctions (because the contract is usually unconditional once you sign)

• tight signing deadlines in private sales

• off the plan contracts where settlement can be much later than expected

• buyers signing in the wrong name because the SMSF structure wasn’t finalised

The core SMSF property rules

The ‘no personal use’ rule

If your SMSF owns a residential property, fund members and related parties generally can’t live in it, holiday in it, or use it as a crash pad between leases. Even a short stay can create a problem.

This catches people in very normal situations, like:

• ‘We’ll stay there for a week while our kitchen is renovated.’

• ‘My daughter can rent it while she finishes uni.’

• ‘We’ll store a few boxes in the spare room until the tenant moves in.’

Those options might feel harmless in a normal investment. In an SMSF, they can be treated as providing a present day benefit.

Related party restrictions

Residential property is where people make optimistic assumptions. In most cases, your SMSF can’t buy a residential property from a fund member or a relative, even if the price looks fair.

Commercial property can be different in some situations, particularly where it meets the definition of business real property and the dealings are on market terms with proper documents. If you’re thinking commercial, treat it as a specialist area and get advice before you sign anything.

Market value and arm’s length terms

SMSF property dealings should be on market terms. That means:

• a market rent, supported by evidence

• expenses paid by the fund, not quietly covered by a member

• no discount services from a related party that change the real economics of the deal

These are record keeping issues as much as they are legal ones. If your annual audit asks, ‘Why is the rent below market?’ you want a clear answer and paperwork to support it.

Liquidity and cash flow

An SMSF can’t run like a personal budget where you cover shortfalls from your own pocket and sort it out later. The fund needs enough cash to pay:

• land transfer duty

• conveyancing and settlement costs

• building insurance and ongoing outgoings

• repairs and maintenance

• vacancy periods

• loan repayments (if borrowing)

A good purchase can still become a headache if the fund is asset rich and cash poor.

What type of property can an SMSF buy in Victoria?

Most SMSF buyers look at:

• established residential property (apartments, units, townhouses, houses)

• commercial property (often with longer leases and different risk)

• vacant land and construction (which needs extra care, especially if borrowing)

• off the plan (where contract terms and timing are key)

There’s no single ‘best’ type. What matters is whether the property fits the fund’s strategy and risk settings, and whether the purchase can be managed without cutting corners on compliance.

A quick word on off the plan in Melbourne

Off the plan apartments can look tidy on paper: new build, depreciation benefits inside the fund, and a clear rental story. The trade off is timing and contract terms. If settlement is delayed, the fund needs to stay liquid and ready. If the finished product differs from what was promised, you want to know what your rights and options are under the contract.

A careful Section 32 and contract review is where you spot the clauses that shift risk to the buyer.

The SMSF property purchase process in Victoria

Here’s how it usually runs when it’s done properly.

1) Confirm the fund can do it

Before you pick a property, check:

• the trust deed allows property investment

• the investment strategy supports property (including diversification, liquidity and risk)

• the fund’s members agree and the decision is recorded properly

If the strategy reads like it was copied from a template years ago, update it before you sign contracts, not after.

2) Decide on the ownership and trustee set up

SMSFs can have individual trustees or a corporate trustee. The correct buyer name matters, because it controls who owns the property and who signs.

If you’re borrowing, there is usually a second layer: a holding trust and a custodian trustee holding legal title until the loan is repaid. That extra layer changes what must appear on the contract.

3) Get the buyer name right on the contract

This is one of the biggest practical risks in SMSF conveyancing.

If the contract is signed in the wrong name, you can’t assume you’ll ‘just change it later’. A change of purchaser can trigger delays, extra duty issues, or tax complications. In the worst cases, it can unravel finance approval because the lender won’t lend to the structure you ended up with.

In a hot Melbourne market, people sometimes sign quickly to secure the deal and fix the structure later. That’s the kind of shortcut that can be expensive.

4) Review the Section 32 and contract before you sign

In Victoria, the seller provides a Section 32 vendor statement. It’s meant to give you key information about the property, title and certain disclosures.

For SMSF buyers, your contract review should still cover the usual Victorian issues, such as:

• title details, easements and restrictions

• whether the property is affected by notices or agreements

• owners corporation information for apartments and townhouses (fees, rules, special levies, building issues)

• zoning and planning matters that affect use

• deposit and settlement terms (especially if your finance needs extra time)

If you’re buying at auction, aim to have the review done before the day. Once you sign after the hammer falls, you’re usually committed.

5) Do the practical due diligence

Even if the SMSF rules are your main concern, don’t skip the basics:

• building and pest inspections where suitable

• checking strata and building history for apartments

• understanding outgoings and realistic rental levels

• factoring in vacancy risk and repairs

A property can be ‘SMSF compliant’ and still be a poor buy.

6) Arrange finance (if borrowing) and prepare for settlement

If you’re using an LRBA, the paperwork is more involved and the lender will have its own requirements. Build in time. Borrowing for an SMSF often needs:

• a larger deposit than a standard home loan

• stricter serviceability checks

• the correct holding trust documents and trustee details

Even for a cash purchase, settlement still needs the funds available at the right time and in the right account.

7) Settle and make sure the property is run through the fund

After settlement:

• rent should be paid into the SMSF bank account

• expenses should be paid from the SMSF bank account

• insurance should be in place and recorded

• all invoices, statements and leases should be kept for the annual audit

Running the property ‘through the fund’ isn’t optional. It’s part of proving the SMSF is being operated properly.

LRBAs and holding trusts: what they are and where people go wrong

An LRBA is a specific borrowing set up for SMSFs. The key idea is that the lender’s security is limited to the asset being bought. To achieve that, the property is typically held in a holding trust by a custodian trustee until the loan is paid off.

Where buyers slip up is not the concept, it’s the detail.

Common LRBA mistakes

Signing before the structure exists
If the holding trust and custodian trustee are not in place and correctly named, you can end up with a contract that doesn’t match the finance structure.

Treating renovations like a personal project
Repairs and maintenance are one thing. Major changes that transform the asset can create compliance issues. If you’re planning big works, get advice early and do not assume it’s automatically allowed.

Building on vacant land
Buying vacant land with an LRBA and then building can be risky if the end result is treated as a different asset. This is an area where you should not rely on guesswork.

Victorian land transfer duty and other costs for SMSFs

An SMSF generally pays Victorian land transfer duty in the same way any other buyer does, based on the dutiable value. Concessions that apply to owner occupiers often don’t apply to SMSFs.

There can be extra duty and surcharge issues where a fund is treated as having foreign ownership or control. If there is any overseas connection in the fund membership or control structure, get advice on duty before you commit.

Also budget for the real day to day costs:

• council rates and water rates

• owners corporation fees (if relevant)

• property management

• insurance

• repairs and compliance items such as smoke alarms

These are not ‘optional extras’. They come out of the fund.

The Melbourne moments that create SMSF trouble

A few scenarios we see often:

The auction rush
You’re excited, the agent is pushing, and you’re tempted to bid before the SMSF structure is ready. If you win, the contract is signed on the spot. This is where buyer naming errors happen.

The family favour
A relative is looking for somewhere to live and you own an SMSF property with a vacancy coming up. Offering it to them feels like a win win. In SMSF terms, it’s a red flag.

The ‘quick’ renovation
A unit in the inner north looks tired but has promise. You assume the fund can pay for a makeover and boost rent. Some works are fine, some aren’t, and borrowing changes what is permitted. Plan before you spend.

The cash flow squeeze
A property can be tenanted and still put pressure on the fund if an owners corporation hits a special levy or the hot water system fails. The fund needs a buffer.

Before you sign: SMSF property checklist (Victoria edition)

• Confirm your trust deed and investment strategy allow property and match the plan.

• Make sure the seller is not a member or related party (and check this carefully).

• Decide the correct purchasing entity name before any contract is signed.

• If borrowing, set up the holding trust and custodian trustee before you commit.

• Review the Section 32 and contract, with extra care for owners corporation documents.

• Budget for duty, settlement costs, insurance, outgoings and a cash buffer.

• Plan how rent and expenses will flow through the SMSF accounts from day one.

After settlement: staying audit ready without living in spreadsheets

You don’t need to run your SMSF like a full time job, but you do need good habits:

• keep a clean paper trail (leases, invoices, bank statements, insurance certificates)

• record key decisions in trustee minutes

• pay expenses directly from the fund, not from personal accounts

• review the investment strategy regularly and keep it aligned with reality

If something changes, like a long vacancy, a major repair, or a plan to refinance, treat it as a fresh decision and document it properly.

FAQ: SMSF property in Victoria

Can my SMSF buy residential property in Melbourne?
Yes, provided it’s an investment held for retirement purposes and it’s not used by fund members or related parties.

Can I live in a property owned by my SMSF?
No. An SMSF property is not a back up home, a renovation stop gap, or a holiday base.

Can my SMSF rent the property to my child or my parents?
In most situations, no. Renting residential property to related parties is a common compliance trap.

Can an SMSF borrow to buy property?
It can, using a specific borrowing structure that includes a holding trust and custodian trustee. The set up must be correct from the start.

Does an SMSF pay land transfer duty in Victoria?
Generally yes, at standard rates based on value. Always budget for duty and confirm how it applies to your structure.

What’s the biggest conveyancing risk with an SMSF purchase?
Signing a contract in the wrong buyer name, especially at auction or under time pressure. Fixing it later can be difficult and costly.

Talk to Pearson Chambers Conveyancing before you commit

SMSF purchases can feel like a lot because you’re balancing property rules with super rules, and in Melbourne the pace can be fast. A calm, careful contract review can save you from signing into a problem.

If you’re considering buying property with your SMSF in Victoria, contact Pearson Chambers Conveyancing for tailored guidance and a complimentary Section 32 contract review.

Email: contact@pearsonchambers.com.au

This article is general information only and isn’t legal advice.