Key takeaways
- SMSFs can hold shares, ETFs, managed funds, term deposits, cash and property, among other assets.
- Every investment must meet the sole purpose test and be made at arm's length.
- Assets generally cannot be acquired from related parties, with limited exceptions.
- In-house assets are capped at 5% of the fund, and collectibles have strict storage and use rules.
One of the main attractions of an SMSF is investment choice. The range is broad, but it sits inside firm boundaries designed to keep the fund focused on retirement and at arm's length from members' personal affairs.
What an SMSF can hold
- Australian and international shares, and exchange-traded funds (ETFs);
- managed funds and listed investment companies;
- term deposits and cash;
- residential and commercial property (with conditions);
- some collectibles, such as art, under strict rules.
Whether a particular asset is appropriate is a separate question from whether it is allowed, and it should be tested against your investment strategy.
The rules that shape every investment
- Sole purpose test. The investment must be for members' retirement, not present-day benefit.
- Arm's length. Buy, sell and lease on commercial terms. Non-commercial dealings can trigger non-arm's length income, taxed at the top rate.
- No acquiring from related parties. Generally the fund cannot buy assets from members or relatives. The main exceptions are listed securities and business real property, acquired at market value.
- In-house asset limit. Investments in, or loans to, related parties are capped at 5% of the fund's total assets.
- No personal use. Members cannot use fund assets, such as living in a fund property or hanging fund-owned art at home.
What about property and crypto?
Property is allowed but heavily conditioned, especially residential property and anything bought with borrowings. See property investing and the borrowing guides. Cryptocurrency can be held if the trust deed allows it, it fits the investment strategy, and it is held in the fund's name separately from members' personal holdings. Whatever the asset, ownership and separation are non-negotiable.
Frequently asked questions
- Can my SMSF buy my house or shares from me?
- Generally no. An SMSF cannot acquire assets from a related party, with limited exceptions for listed securities and business real property acquired at market value. Residential property you own cannot be sold to your fund.
- Can my SMSF invest in cryptocurrency?
- It can, if the trust deed permits it, it fits the investment strategy, and it is held in the fund's name, separate from any personal holdings. Trustees also need to value it and keep clear records.
- What is the in-house asset rule?
- Investments in, loans to, or leases with related parties are 'in-house assets' and are limited to 5% of the fund's total assets. Breaching the 5% limit must be corrected, so trustees need to monitor it.
