A Trustee's Guide to Building Property with an SMSF in South East Queensland

Prepared for: Prospective SMSF Trustees
Prepared by: The Markon Group / Homes by Markon
Date: 2025-11-23

IMPORTANT DISCLAIMER

This report has been prepared by The Markon Group Pty Ltd and its building division, Homes by Markon. The information contained herein is for general educational purposes only and is not intended to be, nor should it be construed as, financial, legal, or taxation advice.

Investing in property through a Self-Managed Super Fund (SMSF) is a complex undertaking with significant financial and legal obligations. The regulations governing SMSFs, particularly concerning borrowing and property development, are strict and subject to change. Non-compliance can result in severe penalties.

The Markon Group and Homes by Markon are not licensed financial advisors and do not provide financial product advice.

Before making any decision related to establishing an SMSF or investing through one, you must seek independent, professional advice from a suitably qualified and licensed financial advisor who specialises in SMSFs. You should also consult with legal and accounting professionals to ensure any strategy is appropriate for your personal circumstances, financial situation, and retirement objectives.

This report should not be relied upon as a substitute for professional advice. The Markon Group accepts no liability for any loss or damage arising from any reliance on the information in this document.

Introduction: Building Your Retirement Future in SE Queensland

Welcome to your guide on a powerful but complex investment strategy: using a Self-Managed Super Fund (SMSF) to build property in the thriving South East Queensland (SEQ) corridor, specifically Brisbane and the Gold Coast. For many Australians, the idea of taking direct control of their superannuation to invest in tangible assets like property is highly appealing. It offers the potential for significant wealth creation, tax efficiencies, and a direct hand in shaping your retirement nest egg.

The SEQ region, with its robust population growth, major infrastructure projects, and dynamic economy, presents a compelling landscape for long-term property investment. However, navigating the journey of an SMSF property build requires a deep understanding of the rules, a clear strategy, and a team of expert partners.

This report is designed to serve as an educational starting point for SMSF trustees in the consideration phase. We will demystify the core concepts, outline what is possible (and what is not), highlight the compliance risks, and provide an overview of the SEQ market.

Our goal is to empower you with foundational knowledge so you can have more informed conversations with your financial advisory team. As expert builders, Homes by Markon understands the construction requirements that align with SMSF regulations. Once your professional advisors have helped you establish the correct financial and legal structure, we stand ready to be your trusted partner in bringing your SMSF property to life.

1. SMSF and Property Investment: The Basics

A Self-Managed Super Fund (SMSF) is a private superannuation fund that you manage yourself. Unlike large industry or retail funds, where investment decisions are made for you, an SMSF gives you, the trustee, direct control over your retirement savings and investment strategy. An SMSF can have between one and six members, who are typically also the trustees.

Why Use an SMSF for Property?

Investing in property through an SMSF is a popular strategy for several key reasons:

Control: You choose the specific property, the location, and the strategy, aligning the investment directly with your retirement goals.
Tax Benefits: The tax environment within super is highly concessional. Rental income is typically taxed at just 15% during the accumulation phase. If the property is sold after being held for more than 12 months, the capital gains tax is effectively 10%. In the retirement (pension) phase, both rental income and capital gains can be tax-free.
Diversification: Direct property can diversify your retirement portfolio beyond traditional shares and bonds.
Leverage: You can use the funds in your SMSF as a deposit and borrow to purchase a property of higher value than you could afford with your existing super balance alone.

The "Sole Purpose Test": The Golden Rule of SMSF

Every decision you make as an SMSF trustee must comply with one overarching principle: the sole purpose test. This Australian Taxation Office (ATO) rule dictates that your fund must be maintained for the sole purpose of providing retirement benefits to its members.

This means you cannot gain a personal, present-day benefit from the fund's assets. For residential property, this rule is absolute: a fund member or any of their relatives cannot live in, rent, or use the property for any reason. Breaching the sole purpose test can lead to severe penalties.

2. The Mechanics of Borrowing: Limited Recourse Borrowing Arrangements (LRBA)

Most SMSFs don't have enough cash to buy a property outright. To borrow money, an SMSF must use a special type of loan called a Limited Recourse Borrowing Arrangement (LRBA). Understanding this structure is critical.

In simple terms, an LRBA is a loan agreement where the lender's rights are limited only to the specific asset purchased with the loan. If the SMSF were to default on the loan, the lender could claim the property, but they would have no recourse (no claim) to any of the other assets within your SMSF, such as cash or shares. This structure is designed to protect your remaining retirement savings.

The Role of the "Bare Trust"

To facilitate an LRBA, a second legal structure called a bare trust (or holding trust) must be established.

The SMSF provides the deposit.
The lender provides the rest of the funds via the LRBA.
The bare trust acquires the legal title to the property and holds it "on behalf" of the SMSF.
The SMSF holds the "beneficial ownership," meaning it is entitled to all rental income and capital growth.
Once the loan is fully repaid, the legal title can be transferred from the bare trust to the SMSF itself.

The "Single Acquirable Asset" Rule

A crucial component of the LRBA rules is that the borrowed funds must be used to purchase a "single acquirable asset."This generally means a property on a single title. You cannot use one LRBA to buy two separate properties on two different titles. This rule is the primary reason why certain building pathways are not possible, as we will explore later.

3. Navigating the Rules: Related Parties and Restrictions

The ATO has strict rules about transactions between an SMSF and its "related parties."

A related party is broadly defined and includes all fund members, their relatives (parents, siblings, children, etc.), and business partners, as well as any companies or trusts these individuals control.

General Prohibition and Key Exceptions

As a general rule, an SMSF is prohibited from acquiring assets from a related party. However, there are two major exceptions relevant to property:

Listed Securities: An SMSF can acquire publicly traded shares from a related party at market value.
Business Real Property: An SMSF can acquire a commercial property (like an office, warehouse, or retail shop) from a related party, provided it is valued independently and purchased at market value. The property must be used "wholly and exclusively" in a business.

Strict Rules for Residential vs. Commercial Property

Residential Property: The rules are inflexible. An SMSF-owned residential property cannot be lived in, rented by, or used in any capacity by a fund member or their relatives.

Commercial Property: The rules are more flexible. An SMSF can purchase a commercial property and lease it to a business owned by a fund member. This is a popular strategy for business owners, allowing them to use their business rent to help pay off an asset inside their own super fund. The critical condition is that this must be done on a commercial, "arm's length" basis. This requires a formal lease agreement with rent set at the fair market rate.

4. What's Possible with an SMSF Property Build?

With the right advice and structure, an SMSF can invest in a newly built property.

Established Properties: The most straightforward path is for an SMSF to purchase an existing residential or commercial property, using an LRBA if borrowing is required.

Off-the-Plan / Turnkey House & Land Packages: An SMSF can purchase a property "off-the-plan" or via a single house-and-land package contract. This structure is compliant because the SMSF is acquiring a single asset—the completed home on its land—under a single contract. If borrowing, the LRBA is used to fund the purchase of this single, complete asset upon settlement.

Commercial Property Options: An SMSF can purchase an existing commercial property or enter into a single contract to have one built. This allows business owners to secure their own premises within their super fund, paying commercial rent to the SMSF, which helps grow their retirement savings.

Repairs vs. Improvements: It's vital to understand the difference.
Repairs: Funds borrowed via an LRBA can be used for repairs and maintenance that restore the asset to its original condition (e.g., fixing a leaking roof, repainting).
Improvements: Borrowed funds cannot be used for improvements that fundamentally change or enhance the property's character (e.g., adding a room, building a granny flat). Any improvements must be paid for with other available cash within the SMSF, not with the loan money.

5. What's NOT Possible: The Vacant Land and Construction Trap

A common misconception is that an SMSF can use an LRBA to buy a block of vacant land and then take out a second loan (or use the same LRBA) to fund the construction of a house.

This is strictly prohibited under current SMSF law.

The reason goes back to the "single acquirable asset" rule.

When you use an LRBA, you must be acquiring a single, whole asset. Vacant land is considered one asset.
Building a house on that land is considered a fundamental improvement or the creation of a new, separate asset, not the repair of the original one.
Because LRBA funds cannot be used for improvements, you cannot use them to finance the construction.

Attempting to do this would be a major compliance breach. The only compliant way to build using an SMSF and a loan is to enter into a single contract for a complete house and land package, where the fund acquires the finished property as a single asset.

6. The Importance of Compliance: Risks and Penalties

The ATO takes SMSF compliance very seriously. The penalties for breaking the rules are severe and are typically levied against the trustees personally, meaning you cannot use the fund's money to pay the fines.

Potential consequences of non-compliance include:

Administrative Penalties: The ATO can issue fines for specific breaches. For example, breaches of the borrowing or in-house asset rules can attract penalties of 60 penalty units, which currently amounts to $19,800 per trustee.
Rectification Directions: The ATO can order you to unwind the non-compliant investment.
Trustee Disqualification: For serious or repeated breaches, the ATO can disqualify you from ever being a trustee of an SMSF again.
Notice of Non-Compliance: This is the most severe penalty. The ATO can declare your fund "non-complying." If this happens, the fund loses its concessional tax status, and a tax rate of 45% can be applied to the fund's entire asset balance.

This is not a "do-it-yourself" area of investment. The financial risks of getting it wrong are catastrophic, which is why a team of qualified, independent experts is non-negotiable.

7. A Focus on South East Queensland (Brisbane & Gold Coast)

The decision to invest in property is as much about "where" as it is about "how." For SMSF investors with a long-term horizon, the South East Queensland market fundamentals for 2025 and beyond are exceptionally strong.

Key Market Drivers:

Population Growth: SEQ, particularly Brisbane and the Gold Coast, continues to experience record levels of interstate migration. This sustained influx of new residents creates relentless demand for housing.

Housing Undersupply: A persistent shortage of available homes, compounded by rising construction costs and delays, means that demand consistently outstrips supply. This imbalance is a primary driver of both property price growth and rental increases.

Infrastructure Boom: The region is undergoing a once-in-a-generation transformation. Billions are being invested in projects like the Cross River Rail, Brisbane Metro, Queen's Wharf precinct, and upgrades to the M1. The lead-up to the 2032 Brisbane Olympics is acting as a further catalyst for investment and urban renewal, enhancing connectivity and liveability.

Strong Rental Market: The high demand and low supply have created an incredibly tight rental market. In late 2025, Brisbane's vacancy rate was around a critically low 0.9%, with the Gold Coast also experiencing rates around 1-1.5%. For an SMSF, this translates to strong, consistent rental yields (projected at 4-5%+) and low vacancy risk, which is crucial for servicing loan repayments and meeting cash flow requirements.

Economic Diversification: The Gold Coast and Brisbane economies have matured well beyond tourism and resources. Growth in the health, education, technology, and professional services sectors provides a stable employment base, supporting long-term market resilience.

Forecasts for 2025-2026 predict continued price growth for both houses and units across Brisbane and the Gold Coast, with some analysts projecting double-digit growth. This combination of capital growth potential and strong rental returns makes SEQ a compelling location for a long-term SMSF property investment strategy.

8. Build Structures and Partnering with Homes by Markon

So, how do you translate this knowledge into a tangible asset? The key is a compliant build structure.

The Compliant Pathway: A Single Contract Turnkey Build

As established, an SMSF using an LRBA cannot buy land and then engage a builder in a separate contract. The compliant pathway is to enter into a single contract that results in the delivery of a single asset—the finished house on its block of land.

This is often referred to as a "turnkey" or "off-the-plan" house and land package. Your SMSF, through its bare trust, signs one contract that covers the entire process from start to finish, settling on the property only once it is complete and ready for a tenant. This structure satisfies the ATO's "single acquirable asset" rule.

How Homes by Markon Can Help

This is where our expertise comes in. The role of your financial advisor is to structure your SMSF and LRBA correctly. Our role, as your building partner, is to deliver the physical asset in a way that aligns with that structure.

Homes by Markon is not a financial advisor. We are expert builders who understand the SMSF landscape from a construction perspective.

Once you and your advisory team have determined that a new-build property is the right strategy for your fund, we can:

Work with you to identify a suitable house and land package that fits your SMSF's investment strategy and budget.
Provide a single, fixed-price contract for the entire turnkey build, ensuring compliance with the "single acquirable asset" rule.
Manage the entire construction process, from design and approvals to handover.
Deliver a high-quality, tenant-ready residential or commercial property, built to the highest standards.

We bridge the gap between your financial strategy and the physical reality, ensuring the asset you are acquiring is delivered seamlessly and in accordance with the strict requirements of your SMSF structure.

9. What's NOT Possible: The Vacant Land and Construction Trap

A common misconception is that an SMSF can use an LRBA to buy a block of vacant land and then take out a second loan (or use the same LRBA) to fund the construction of a house.

This is strictly prohibited under current SMSF law.

The reason goes back to the "single acquirable asset" rule.

When you use an LRBA, you must be acquiring a single, whole asset. Vacant land is considered one asset.
Building a house on that land is considered a fundamental improvement or the creation of a new, separate asset, not the repair of the original one.
Because LRBA funds cannot be used for improvements, you cannot use them to finance the construction.

10. The Importance of Compliance: Risks and Penalties

Potential consequences of non-compliance include:

Administrative Penalties: The ATO can issue fines for specific breaches. For example, breaches of the borrowing or in-house asset rules can attract penalties of 60 penalty units, which currently amounts to $19,800 per trustee.
Rectification Directions: The ATO can order you to unwind the non-compliant investment.
Trustee Disqualification: For serious or repeated breaches, the ATO can disqualify you from ever being a trustee of an SMSF again.
Notice of Non-Compliance: This is the most severe penalty. The ATO can declare your fund "non-complying." If this happens, the fund loses its concessional tax status, and a tax rate of 45% can be applied to the fund's entire asset balance.

This is not a "do-it-yourself" area of investment. The financial risks of getting it wrong are catastrophic, which is why a team of qualified, independent experts is non-negotiable.

11. A Focus on South East Queensland (Brisbane & Gold Coast)

Key Market Drivers:

Population Growth: SEQ, particularly Brisbane and the Gold Coast, continues to experience record levels of interstate migration. This sustained influx of new residents creates relentless demand for housing.

Housing Undersupply: A persistent shortage of available homes, compounded by rising construction costs and delays, means that demand consistently outstrips supply. This imbalance is a primary driver of both property price growth and rental increases.

Infrastructure Boom: The region is undergoing a once-in-a-generation transformation. Billions are being invested in projects like the Cross River Rail, Brisbane Metro, Queen's Wharf precinct, and upgrades to the M1. The lead-up to the 2032 Brisbane Olympics is acting as a further catalyst for investment and urban renewal, enhancing connectivity and liveability.

Strong Rental Market: The high demand and low supply have created an incredibly tight rental market. In late 2025, Brisbane's vacancy rate was around a critically low 0.9%, with the Gold Coast also experiencing rates around 1-1.5%. For an SMSF, this translates to strong, consistent rental yields (projected at 4-5%+) and low vacancy risk, which is crucial for servicing loan repayments and meeting cash flow requirements.

Economic Diversification: The Gold Coast and Brisbane economies have matured well beyond tourism and resources. Growth in the health, education, technology, and professional services sectors provides a stable employment base, supporting long-term market resilience.

12. Build Structures and Partnering with Homes by Markon

So, how do you translate this knowledge into a tangible asset? The key is a compliant build structure.

The Compliant Pathway: A Single Contract Turnkey Build

How Homes by Markon Can Help

Homes by Markon is not a financial advisor. We are expert builders who understand the SMSF landscape from a construction perspective.

Once you and your advisory team have determined that a new-build property is the right strategy for your fund, we can:

Work with you to identify a suitable house and land package that fits your SMSF's investment strategy and budget.
Provide a single, fixed-price contract for the entire turnkey build, ensuring compliance with the "single acquirable asset" rule.
Manage the entire construction process, from design and approvals to handover.
Deliver a high-quality, tenant-ready residential or commercial property, built to the highest standards.

Conclusion and Your Next Steps

Using your SMSF to build an investment property in South East Queensland can be a highly effective strategy for building long-term wealth for your retirement. The region's powerful economic and demographic fundamentals provide a strong foundation for growth, while the SMSF structure offers significant tax advantages and control.

However, this is a high-stakes environment. The rules are complex, the penalties for error are severe, and the process requires meticulous planning and execution. Success depends on having the right team of experts guiding you at every stage.

Final Disclaimer: This report is a guide for educational purposes only and does not constitute financial advice.

Your journey should begin with a conversation, not with a builder, but with a financial professional.

Your Call to Action

Seek Professional Financial Advice. Your first and most critical step is to engage a licensed, independent financial advisor who specialises in SMSFs. They will assess your personal situation and determine if an SMSF property strategy is right for you. They are the only ones qualified to give you advice.
Discuss Your Build with Homes by Markon. Once your advisory team has given you the green light and the correct SMSF and borrowing structures are in place, contact us. We can discuss our SMSF-aligned turnkey building solutions and how we can help you create a high-quality asset for your fund.
Partner with an Expert Builder. Choose a building partner who not only delivers exceptional quality but also understands the unique compliance requirements of an SMSF build. Partner with The Markon Group and Homes by Markon to ensure your property is delivered professionally, efficiently, and in alignment with your financial strategy.

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