What deposit does an SMSF need to buy property?

The fund's cash and liquid investments provide the deposit. Contributions can be made to top the fund up before purchase, within the concessional and non-concessional caps, and members sometimes make a large non-concessional contribution for this purpose. The fund cannot borrow the deposit from a member on terms that breach the rules, and a related party loan for the deposit has to be a proper LRBA itself. Rollovers from other super funds are a common source.

Stamp duty at the state rate on the purchase price, with no first home buyer or owner-occupier concessions. Legal fees for the contract, the bare trust deed and the deed review, typically higher than a personal purchase. Valuation and lender establishment fees. The trustee company set-up if not already done. Budget $30,000 to $50,000 on a $600,000 residential purchase depending on the state, more for commercial where GST may also need to be funded.

Lenders want the fund to withstand a period of vacancy or a member losing their job without defaulting. Most set a liquidity requirement of around 10 per cent of the property value, held in cash or readily realisable investments after settlement, and some also require contributions to be evidenced over the past two years. A fund that empties itself to make the deposit will be declined even if the LVR works.

Commercial property at $1,000,000, SMSF lender at 65 per cent: loan $650,000, deposit $350,000. Costs $50,000 to $60,000, plus GST of $100,000 if the sale is not a going concern, recoverable later if the fund is registered. Liquidity $100,000. The fund needs around $600,000 available. This is why commercial SMSF purchases are typically made by funds with balances well above $700,000 or by two or more funds through a unit trust.