SMSF Property Purchase Questions.

You are an Australian property finance educator helping someone understand the compliance framework, questions, and risks associated with purchasing property through a self-managed superannuation fund (SMSF) before they engage specialist advisers. This prompt generates questions and framework — it does not provide advice.

MY DETAILS:
- SMSF status: [I have an existing SMSF / I am considering setting one up / I don't have one yet]
- If existing: approximate total SMSF balance: $[amount]
- If existing: current investments held in the SMSF: [shares / cash / existing property / other]
- My intent: [purchase a residential investment property / purchase a commercial property / purchase a property to eventually retire into / I'm not sure]
- Target property type: [residential / commercial / industrial / other]
- Target price range: $[amount]
- I intend to use: [SMSF cash only / SMSF borrowing through a Limited Recourse Borrowing Arrangement (LRBA) / I'm not sure]
- Are any fund members related to the target property: [I want to buy a property I or a related party might occupy or use / no, it's purely for investment / I'm not sure]

Return an SMSF property framework document with these 6 sections:

## 1. THE COMPLIANCE FRAMEWORK — WHAT YOU MUST UNDERSTAND FIRST
Explain the following compliance requirements in plain English:
- The sole purpose test: what it requires and what violates it
- The in-house asset rules: what they are and how property purchasing from or to related parties can breach them
- The arm's length requirement: why all transactions must be at market value and documented
- The residential property restriction: why SMSF members and their related parties cannot occupy or use a residential property owned by their SMSF
- The commercial property exception: under what conditions an SMSF member's business can lease commercial property from their SMSF, and why this is a different set of rules
- Flag: these are the most commonly misunderstood aspects of SMSF property. Breaching any of them can result in the fund becoming non-complying, which has severe tax consequences. This is not a DIY area.

## 2. THE LIMITED RECOURSE BORROWING ARRANGEMENT (LRBA)
If I intend to borrow to purchase property in my SMSF:
- What is an LRBA and how does it differ from a standard investment loan?
- What is a bare trust and why is it required?
- What are the typical LVR limits for LRBA lending: residential (typically 70–80%) and commercial (typically 65–70%)?
- How does the loan need to be serviced: from SMSF income and contributions only, not from personal funds
- What happens if the property goes into negative cash flow: the SMSF must be able to cover the shortfall from existing fund assets
- LRBA rate premium: LRBA loans typically carry a higher interest rate than standard investment loans. Note the typical premium.
- Lender appetite for LRBA: fewer lenders offer LRBA products than standard investment loans. Note that this is a specialist product requiring a specialist broker.

## 3. THE FINANCIAL TEST — CAN MY SMSF AFFORD THIS?
Help me think through whether my SMSF balance supports this purchase:
- If purchasing without borrowing: the SMSF needs to hold the full purchase price plus stamp duty plus purchase costs, plus retain enough liquidity for ongoing fund obligations including member benefit payments if members are near retirement
- If purchasing with LRBA: the SMSF needs the deposit (20–30% of purchase price), stamp duty, purchase costs, and sufficient ongoing cash flow from contributions and existing investments to service the LRBA
- Diversification consideration: APRA and the ATO expect SMSF trustees to consider diversification. A property that represents more than 70–80% of total fund assets is likely to attract ATO scrutiny on the next audit
- Cash flow sustainability: can the SMSF service the loan from contributions and rent alone without relying on the property selling?

## 4. THE 18 QUESTIONS TO ASK YOUR SMSF SPECIALIST
Generate the 18 most important questions I should ask an SMSF specialist (a combination of a licensed financial adviser with SMSF expertise and an SMSF accountant) before proceeding. Group them as:

Questions about my fund's eligibility and compliance (6 questions)
Questions about the specific property and its compliance (6 questions)
Questions about the financial sustainability of this structure (6 questions)

## 5. WHO I NEED TO ENGAGE AND IN WHAT ORDER
Describe the specialist team I need to purchase property in an SMSF and what each specialist does:
- SMSF financial adviser: their role and what they advise on
- SMSF accountant: their role and what they handle
- SMSF property lawyer: their role, including the bare trust deed
- SMSF mortgage broker: their role and why a specialist is required
- Licensed property valuer: why an independent valuation is required

## 6. THE HONEST RISK ASSESSMENT
What are the most common mistakes SMSF property investors make, what are the consequences, and what is the ATO's current posture on SMSF property compliance? Be direct about the complexity and the risk of getting it wrong.

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Educational framework only. This prompt does not constitute financial advice, SMSF advice, tax advice, or legal advice. SMSF compliance is complex, highly regulated, and the consequences of non-compliance are severe. Engage a licensed financial adviser with SMSF accreditation, a qualified SMSF accountant, and a specialist property solicitor before taking any action.