Superannuation (or ‘super’) is one of the most powerful wealth-building tools available to Australians. While many people are content to let their super sit in a standard retail or industry fund, others consider taking a more active role—using their super to invest in property, shares, or other assets through a Self-Managed Super Fund (SMSF).
One of the most popular strategies is to buy an investment property with superannuation, which allows you to use your super to acquire residential or commercial property—under strict ATO guidelines. But is this approach right for you?
Below, we explore the advantages and disadvantages of using your superannuation to invest, so you can make an informed decision that suits your financial goals.
✅ Pros of Investing with Your Superannuation
1. Tax Advantages
Super funds benefit from a concessional tax environment. Earnings within your super fund are taxed at only 15%, which is typically lower than your personal income tax rate. In retirement, this can drop to 0%, making super one of the most tax-effective ways to invest.
2. Leverage for Property Investment
Through an SMSF, you can borrow money to invest in property using a Limited Recourse Borrowing Arrangement (LRBA). This allows you to access assets worth more than your available balance—potentially multiplying returns.
3. Diversification and Control
An SMSF gives you more control over where your money is invested. You can choose from a wider range of assets like:
- Direct property
- Australian and international shares
- ETFs and managed funds
- Gold, collectibles, or even crypto (with limitations)
4. Asset Protection
Assets held within your super are generally protected from creditors. This means if you run into personal financial trouble, your super investments are usually safeguarded.
5. Long-Term Growth
Superannuation is a long-term vehicle designed to grow your wealth until retirement. Investments made through super have decades to compound, providing significant potential for growth—especially if you’re starting early.
⚠️ Cons of Using Your Superannuation to Invest
1. Limited Access to Funds
Once your money is in super, it’s locked away until you reach your preservation age and retire. This lack of liquidity can be a serious drawback if you need funds in the short term.
2. High Compliance and Regulatory Burden (SMSFs)
If you go down the SMSF path, you’ll be responsible for:
- Annual audits
- ATO compliance
- Record-keeping
- Preparing financial statements and tax returns
Non-compliance can lead to penalties, so professional advice is essential.
3. Costs Can Add Up
While large super balances benefit from economies of scale, SMSFs with low balances (typically under $200,000) may find fees and setup costs eat into their returns. This includes:
- SMSF setup and management fees
- Accounting and legal costs
- Investment management fees
4. Investment Risk
With control comes responsibility. Poor investment choices can reduce your retirement savings. You won’t have the professional management that large super funds provide, so due diligence is essential.
5. Strict Borrowing Rules
If you plan to borrow to invest in property, be aware that LRBAs come with strict rules:
- The property must be a single acquirable asset
- It cannot be lived in by you or related parties
- Loan structures must meet ATO criteria
This makes SMSF property more complex than personal property investment.
Final Thoughts: Is It Worth It?
Using your superannuation to invest—especially through an SMSF—can be a smart strategy if you have the knowledge, discipline, and balance to make it worthwhile. It offers unique tax benefits and control, but it’s not for everyone.
Speak with a licensed financial adviser before making any decisions. Investing through super is a long-term commitment with serious implications for your retirement future.
