Trustees Self Managed Super Funds are responsible to invest Superannuation Funds for the Retirement benefits of the beneficiaries or the members of the fund. One such Investment choice is Property.

Property can be of different types such as

• Commercial Office space
• Shops
• Industrial, factories
• Residential (apartments, houses etc)

However for DIY Super Fund purposes property is differentiated in two categories

1) Business Real Property - Which trustees and members can occupy
2) Other - which a trustees or members cannot occupy

This property is exempted from in-house asset rules. Business real property has to be used wholly and exclusively in one or more businesses (whether carried on by a related party or not) of a related party such as Trustees, members etc.

A doctor's residence where part of the home is set aside for medical practice, or where a mechanic works from his home garage will not be considered as a Business real property as it is not wholly used for business purposes. Business Real Property can be lent or leased to a related party at a market value.

DIY Super Funds can jointly own business real property with a related party by investing in a company or a trust that holds the property. However, this entity must meet specific conditions, such as that the entity does not borrow and there is no lien on the property.

A super fund can invest in other types of Property. With an average 4% - 10% rate of return, an investment property usually increases in value over the long term.

Any non-business real property CAN NOT be lent (used) or leased to a related party (members or relatives of members) even at market value (or higher) as it directly contravenes the sole purpose test.

This test defines a complying fund, which means that a complying fund should invest for retirement benefits of the members. Hence no investment should be made where it gives benefits to members or related parties before retirement (UC Services note: as ridiculous it may sound, but these are the rules).

Trustees have to be very careful while purchasing Residential Property particularly holiday homes, as assets of DIY Super Fund cannot be leased to a related party.

Further, no charge can be placed over the assets of a fund. However properties can be bought Tenants in Common and Gearing is possible at individual level. We call it "Super Gearing".