Everyone knows there are a lot of rules surrounding what you can and cannot do with your self managed super fund (SMSF) loans. But one thing that can be a little tricky is renovations, especially if you’re hoping to use your SMSF to help pay for the modifications. However, there are very specific outlines laid out by the Australian Taxation Office (ATO) about where your SMSF rights lie.
For example, if you’re looking to do the renovations yourself, it’s essential that any and all products and materials purchased for the project are done so under the SMSF’s name, not your own. While you may be tempted to do this if you’re able to secure trade discounts or some other benefit, the ATO has specifically outlined that this isn’t possible.
Furthermore, you can only pay for your time with the SMSF if you hold the right qualifications and regularly perform the services for the public (as a plumber, for example). This is an extremely strict criteria and if you’re unable to fulfill these terms, you’ll need to either do the work for free or outsource it to a professional with the correct qualifications.
Major renovations like adding a new room to a property should be taken up personally with the ATO to secure a private ruling. These are too varied to have a hard and fast rule, and will need to be discussed on a case-by-case basis. But it’s important to remember that you never live inside the property, even during renovations. This is one of the main clauses associated with securing an SMSF loan.
These are just some of the basics to keep in mind before undertaking renovations through an SMSF. Before starting these types of projects, speaking with a financial expert about your liability and responsibilities will ensure you toe the line and keep everything legal.
