What Happens to SMSF Property When You Retire?

What Happens to SMSF Property When You Retire?

One of the biggest advantages of investing in property through a Self-Managed Super Fund (SMSF) is the potential to receive rental income and capital gains completely tax-free in retirement. But what actually happens to your SMSF property once you reach retirement age?

Can you sell the property? Can you move into it? Can you continue earning rental income? These are key questions to address when building your retirement strategy.

Transitioning from Accumulation to Pension Phase

Once an SMSF member reaches age 60 and satisfies a condition of release (such as fully retiring), the fund can transition from accumulation phase to pension phase.

• Rental income becomes tax-free – Income that was previously taxed at 15% is now fully exempt.

• Capital gains can be exempt – If the property is sold in pension phase, no Capital Gains Tax (CGT) applies.

• Minimum pension payments must begin – SMSFs are required to make minimum annual payments to members.

Key Insight: Transitioning into pension phase offers significant tax benefits, but it comes with ongoing compliance requirements.

Can You Move Into Your SMSF Property in Retirement?

This is a common question — and the answer depends on whether the property remains in the fund.

• No, not while it’s still inside the SMSF – Superannuation rules prohibit using SMSF-owned residential property for personal purposes, even after retirement.

• Yes, but only if transferred out of the SMSF – You must meet a condition of release and legally transfer the property to your personal name.

  • A formal market valuation is required.

  • Stamp duty and transfer costs may apply (varies by state).

Key Insight: You cannot simply move in after retirement — a formal transfer process is required, and professional advice is essential.

What Happens If You Sell the SMSF Property?

SMSF trustees can choose to sell property in retirement — and doing so at the right time can bring major tax advantages.

• If sold in accumulation phase – Capital gains are taxed at 10% (if held for more than 12 months).

• If sold in pension phase – The entire capital gain is tax-free.

Key Insight: Selling during pension phase can lead to significant tax savings, making it a key part of an effective retirement strategy.

Keeping the Property and Earning Tax-Free Rental Income

If you don’t want to sell the property, you can continue to hold it within the SMSF and earn rental income — tax-free in pension phase.

• The property can remain within the SMSF and continue generating rental income.

• That income can be used to fund your required pension payments.

• The property cannot be used personally or by related parties.

Key Insight: Keeping the property in the fund allows for long-term, tax-free income — an attractive option for many SMSF investors.

What Happens to SMSF Property After Death?

Estate planning is a crucial part of SMSF management. When a member dies, the SMSF property must be dealt with according to the fund’s rules and superannuation laws.

• Property can be passed to beneficiaries via a pension or lump sum (depending on the estate plan).

• If the fund doesn’t have sufficient liquid assets, the property may need to be sold to meet the payout.

• If the property is passed to a non-dependent as a lump sum, tax may apply.

Key Insight: Proper estate planning ensures your SMSF assets — including property — are distributed according to your wishes and in the most tax-effective way.

Final Thoughts

Owning property in an SMSF doesn’t end with retirement — it transitions into a new phase. Whether you choose to keep the property, sell it, or transfer it to personal ownership, the key is understanding your options and planning ahead. Done right, SMSF property can deliver stable, tax-free income well into retirement.

Thinking about how SMSF property fits into your retirement? Book an investment session with PropVest today.

Disclaimer: This article provides general information only and does not constitute financial, legal, or tax advice. You should seek independent advice tailored to your circumstances before acting.