Overseas Property

An SMSF can invest in properties overseas as neither the SIS Act or the ATO prohibit these types of investments. This type of investment is not too different to investing in Australian property.

The SMSF must have legal title over the overseas property. Some countries will not allow the SMSF to hold the title of the property. Hence a structure looks like the below graph will need to be set up before the Fund invests in the overseas property:

The above structure is also required if there is borrowing involved in purchasing the property.

Note: The SMSF owns 100% of a Bare Trust \ Custodian Trust. The SMSF has 100% ownership of an overseas investment property and an overseas bank account

There are a number of options and requirements that the fund will have to address before investing in an overseas property.

  1. The fund will need to ensure the Investment Strategy and the Trust Deed allows the SMSF to invest in an overseas property.
  2. An SMSF although not unique to Australia may not be recognized in the country you are investing in. If you need, we can establish a suitable structure that will meet the legislative requirements both abroad and in Australia.
  3. The overseas property will need to be in the name of the SMSF or a Bare/Custodian Trust that the fund has control over, there are some exceptions detailed in the next point where foreign investors are restricted to buy property.
  4. In some Asian and sub-continent countries, foreign overseas investors are not allowed to own property. The fund will need to find a resident (preferably a member of the SMSF) in the country who can represent the fund, so the title of the property can be accommodated in the structure.
  5. The SMSF needs to make sure that the property has not been used as security for a loan or mortgage.
  6. The laws and customs are different in all countries and the implications specific to that country will need to be adhered to.
  7. The entity you have established will have to be registered to pay taxes in the overseas country. An accountant in that country will be able to provide the appropriate assistance. We will be able to help you with the tax obligations locally.
  8. To avoid paying double taxes here is a list of countries that the ATO has a reciprocal tax treaty with.
  9. If you are planning to borrow funds to make the overseas property investment, the fund must confirm that the SMSF loan includes limited recourse arrangements and the correct limited recourse clauses.
  10. The LRBA terms and conditions must be consistent with good arm’s length practices.
  11. The SMSF or Bare/Custodian Trust will need to have an overseas bank account to receive rent payments, and pay for maintenance and other related expenses. The financial institution will need to meet the definition of a Deposit Taking Institution as stipulated in the Banking Act 1959.
  12. Where the language spoken in the investing country is not English we recommend that a translation is obtained of all documents, contracts and agreements.
  13. Be mindful, that an additional Bare Trust is required to initiate an overseas bank account to be used in conjunction with an overseas property.

 

To see how you can invest in USA Property, please see here.

 

Q & A:

Can an individual who is not a Member or a Trustee in the SMSF, hold ownership of an overseas property on behalf of the Fund?

Yes, a third party can hold the title of the overseas property as long as a Declaration of Trust is set up to reflect that the property being held by the third party is on behalf of the Fund and the ultimate ownership lies within the SMSF.

  • vivek

    Hi
    I already have my SMSF setup (corporate trustee). I now need to purchase a overseas property (INDIA) and wanted to know if you can help me out with the required missing documents that I need (Bare Trust – individual trustee, minutes of meeting, update SMSF deed if required to reflect the investment). thanks
    vivek

    • superannuationwarehouse

      Vivek,

      To issue these documents, we would usually be the administrator so we can view the current details of the Fund. We then use a lawyer to issue these documents. The procedure for us to take on your Fund is explained here:

      http://www.smsfwarehouse.com.au/smsf-setup/existing-smsf-take-on/

      More details on the process involved with overseas properties are explained here:

      http://www.smsfwarehouse.com.au/smsf-investments/property/overseas-property/

      Happy to discuss if not clear.

      • vivek

        Hi
        I would like to have a chat with you to provide my situation and than decide next steps i.e. Whether to move my fund administration or not.
        appreciate if you can call me back, I have left a message for your on the number provided on the website.

        vivek

        • superannuationwarehouse

          Vivek,

          As discussed on the phone, please send me your SMSF name, the Members’ names and the name of the Corporate Trustee. We use a lawyer to draw up the bare trust and there will be a second bare trust to hold the bank account. We will charge your Fund $950. Can you also send us the details of the property to be noted in the bare trust as explained here: http://www.smsfwarehouse.com.au/smsf-investments/

          Trust this is clear.

          Regards Hein Preller Director – Superannuation Warehouse 03 95894256 (Office) 04 11241215 (Mobile) smsfwarehouse.com.au

    • superannuationwarehouse

      Vivek,

      As discussed on the phone, please send me your SMSF name, the Members’ names and the name of the Corporate Trustee.
      We
      use a lawyer to draw up the bare trust and there will be a second bare
      trust to hold the bank account. We will charge your Fund $950. Can you
      also send us the details of the property to be noted in the bare trust
      as explained here:
      http://www.smsfwarehouse.com.au/smsf-investments/

      Trust this is clear.

      Regards Hein Preller
      Director – Superannuation Warehouse 03 95894256 (Office) 04 11241215 (Mobile)
      smsfwarehouse.com.au

  • vikas sood

    I know this is an old thread but I am really interested to find out what the rules are?So you can buy property in India through an SMSF with the correct structure in place. Can SMSF (Bare trust) hold a title of a piece of real estate in India? There must be rules on what kind of property you can or cannot buy.

    • Hein Preller

      Vikas,
      An SMSF can purchase property overseas on the basis it it has a legal enforceable right on the title.
      Therefore, if the SMSF’s name appears on title, a bare trust may not be required if there’s no loan. But overseas countries will usually not note the SMSF as the legal owner. Therefore we do a bare trust to note if its in your name, you hold it for the benefit of the SMSF.
      Trust this answers your question.

  • Dan

    G’day,
    I’m looking to start a SMSF I have approx. 200,000 in shares/cash incl. my wife’s super (about 30k).

    I want to purchase property in the United Kingdom while the exchange rate is falling (targeting for the next 12 months if the rate is favourable)

    Is it possible to set up a SMSF for purchasing property in the UK borrowing at 80% with no LMI?
    Anymore information around this would be much appreciated

    Dan

    • superannuationwarehouse

      Dan,

      On the basis the Trust Deed and Investment Strategy allows for this type of investment, there’s no reason from a technical point of view why you can’t proceed with this transaction. The standard Investment Strategy and Deeds we issue allows for this type of investment.

      From a practical point of view, an overseas bank will generally not lend to an SMSF. The SMSF must have sufficient funds to purchase the overseas property outright. Same for banks in Australia, they will generally not grant a loan for an overseas asset.

      A possible way might be to do a related party loan to the SMSF. See our page on this topic:
      http://www.smsfwarehouse.com.au/smsf-investments/property/smsf-loans/related-party-loans/

      Lastly, also be mindful the SMSF must have legal ownership over the overseas assets it owns. This means the UK property must be registered in the name of the SMSF or alternatively set up a bare trust arrangement noting the legal ownership of the asset to the SMSF.

  • Gaz Khawaja

    Hi,

    I’m looking to start a SMSF and primary country of investment will be Pakistan. So please tell me what kind of trust i would need to set up and associated costs.
    I wont be borrowing.

    Thanks Gaz

    • superannuationwarehouse

      Gaz,

      To start an SMSF, which is a type of a trust structure, cost $150 or $1,100 using a corporate trustee. This is the first step you will need in order to use super for investments.
      When investing overseas, its important the SMSF holds legal title over the assets it owns. Usually overseas countries do not recognise an SMSF and this would require a bare trust to be set up, as explained above. We charge $950 to set up a bare trust. More on the fees we charge on this page:
      http://www.smsfwarehouse.com.au/smsf-setup/costs/
      Trust this gives you the guidance needed.

      • Mohsin Aziz

        Hi,
        I am also thinking about purchansing an investment property in Pakistan using my Super. I won’t be borrowing either. Could you please explain why bare trust is needed.
        Thanks,
        Mohsin

        • superannuationwarehouse

          Mohsin,

          The
          SMSF must have a legal enforceable right to the asset it owns. The property can’t
          be in a person’s name if the SMSF actually owns it.

          If the overseas property was registered in the name of the SMSF, all good.
          However with overseas countries they usually do not register the property in
          the name of the SMSF. This might be because they dont know what an SMSF is or
          don’t want to register it in the name of an SMSF trust structure. For this
          reason, if it’s registered in your name, you need a document noting you hold it
          on behalf of the SMSF. This document is called a Bare Trust.

          So the objective is for the Bare Trust to note the individual as the holder of
          the overseas property on behalf of the SMSF.

          We use legal documents to set this up and the cost if we do it is $950.

          Thanks

          • Mohsin Aziz

            Thanks,
            Just another quick one. To setup an overseas back account (in my name) would I need another bare trust? I am sure the overseas banks won’t allow me to open up an account in Super funds name.
            Mohsin

          • superannuationwarehouse

            Mohsin,
            The SMSF must have legal title over all assets it owns. Its important you keep personal assets separate from the SMSF.
            If the bank account is in your name, it needs to be in your capacity as Trustee. We then set up a Declaration of Custody Trust to reflect the arrangement that you hold this bank account for the SMSF.

        • Mohsin Aziz

          Thanks for your response. Can please give me a call on 0430033995. I want to discuss my circumstances.

          Mohsin

  • Zeeshan Qureshi

    Hi

    Is it possible for 2 different SMSF to chip in and buy a
    property overseas?

    • superannuationwarehouse

      Zeeshan,
      Two SMSF’s can purchase together, and this is called tennants in common.
      Make sure the SMSF has a legal title to the asset it owns. So there needs to be a legal enforceable right for the SMSF to this asset. Either the SMSF must be noted on title, or alternatively, set up a Bare Trust noting a Trustee hold the property on behalf of the Fund. The first option would not cost anything to set up (apart from the normal stamp duties etc.) and to set up a Bare Trust will cost $950 if we set it up.
      Trust this answers your question.

  • Matt

    Hi, If I set up a SMSF with the structure described above. Am I capable of buying a property offshore (i.e NZ). Secondly, the rental income is obviously part of the investment income,
    would that include Airbnb rental income? I personally don’t see it as carrying
    on a business, more so maximising the yield.

    What are the costs involved in your setting this structure
    up. Assuming that would mean an Austrailan Structure and some sort of New
    Zealand based structure as well?
    Thanks

  • Kavinda

    I got this below scenario which I would like to have an input from you please,

    Me and my wife wants to set up a SMSF. Currently we have around $20,000 in total in our retail accounts.

    Our main aim is to invest in Sri Lanka by purchasing a land initially for around $20,000(outright) and then few years later to build a house for around $20,00 to rent it. (outright)

    Once this project completed we will go to Sri Lanka for around 5 to 6 years and then will come back to Australia.

    By the time we leave Australia, we will have our PPR and an Investment property in Australia and we will do regular visits to Australia during this time as well.

    In addition we have our own property in Sri Lanka to live while we are over there.

    Just want to know what type of SMSF structure will be suitable for us and also most importantly is this a possible scenario.

    • Hein Preller

      Kavinda,

      We are an accounting firm and do not provide financial advice. If you want to
      set up an SMSF structure, we can execute this for you. However, the decision to
      proceed is your decision.

      An SMSF can invest in overseas properties, but it’s important that an SMSF
      holds legal title over the assets it owns. Usually overseas countries do not
      recognise an SMSF and therefore a Bare Trust set-up may be required to ensure
      ultimate legal ownership by the SMSF. See here for guidance:

      https://www.smsfwarehouse.com.au/smsf-investments/property/overseas-property/

      If there is a potential you might not be a tax resident, be mindful of SMSF
      residency rules:

      https://www.smsfwarehouse.com.au/smsf-setup/residency-rules/

      There is no legal minimum or maximum amount required to set up an SMSF. Its
      your choice to proceed, so make sure the numbers stack up for you.

      Trust this answer your questions.

  • Rajeshwar

    Dear Hein. Does ATO allow crypto currencies through SMSF? DO you have template to amend trust deed Investment strategy please

  • Azk Jon

    —I still could not find fee information for required documents i.e. bare trust and declaration of custody trust for bank account. for property purchase in Pakistan. can you please let me know?

    — I have a bank account in Pakistan it is normal savings account. Can that be used to transfer my super funds to purchase property and then to operate rentals etc.? If not, please tell me exactly what type of account is required in Pakistan? (I refer to your answer to Mohsin Aziz on https://www.smsfwarehouse.com.au/smsf-investments/property/overseas-property/ where you said “If the bank account is in your name, it needs to be in your capacity as Trustee” what does it mean? what type of account is it?)

    —Also tell me the process of transferring funds from smsfwarehouse account to Pakistani account, as you said i will have to transfer funds myself. I will be using a money transfer company as they provide competitive rates and they are registered remittence/forex company in Sydney. I usually register a remittence in their online portal and then transfer funds from my bank account to their ANZ account and then they remit the money to pakistan bank account in 1-2 days. Can I use them?

    —Also I could not find details on how can I deposit/add funds other than my super balance in account(that i will open for SMSF in Pakistan) as required investment property costs more than my super balance?

  • Svetlana Volski

    Dear team,
    We are Australian residents living in Central Coast. We are thinking to buy an investment property (home and land package as a single contract) in Wanaka, New Zealand with our super money. We have established SMSF many years ago and do not need to borrow additional funds to buy this property.
    Currently we have many questions on how to organize this purchase, what steps are required to make it happen?
    Would you be able to lead us from the current situation to the end of the purchase?
    thank you in advance.

    • https://www.smsfwarehouse.com.au Superannuation Warehouse

      Svetlana,

      It makes the process much easier if there’s no loans involved.

      Make sure overseas residential or commercial property is listed as an option in the Investment Strategy of your SMSF. You can download a template here:
      https://www.smsfwarehouse.com.au/smsf-investments/strategy/

      Also make sure the SMSF has a legal enforceable right to the property ownership. If the property is in your name personally (NZ might not recognise your SMSF) ensure a Declaration of Custody Trust is set up to note the SMSF as owner.

      We can execute this for you.

      Keep well,

  • Stella Haros

    Hi Are you able to recommend any lenders that will help with a loan through SMSF for an overseas property? The big banks will not lend for OS investments.
    thank you Stella

    • Hein Preller

      Stella,

      As far as I know no lender will finance an overseas property.

      The reason for this is the bank can generally not hold the title documents or register their interest on title for an overseas property as they do with local property.

      The two most likely options you can follow is to either purchase the property outright or use a related party loan. We explain how this works here:

      https://www.smsfwarehouse.com.au/smsf-investments/property/smsf-loans/related-party-loans/

      Trust this gives you the guidance needed.

  • Duro

    Hi you indicated that om some countries foreign overseas investors are not allowed to own property. and that the fund will need to find a resident (preferably a member of the SMSF) is it acceptable if a fund member is a dual national? who would represent the fund and title of the property in their own right.

    • Hein Preller

      Duro,

      An SMSF must have a legal right to the assets it owns. Its up to the Trustees to ensure the Fund owns the asset.

      Many people find this too hard to do. If you find it hard to do or confusing – just don’t invest there.

      Being a Trustee of an SMSF is a responsible position and you need to make sure the Fund is the legal owner of the property in question.

  • Roshan Shah

    Hi , I want to setup SMSF and buy land in Overseas nepal as investment property. I know in Nepal they do not recognize smsf. How i can buy land through my smsf. And I do not need loan as my super amount is able to purchase does land. ANd what will be process and how much it will cost.

    • Hein Preller

      Roshan,

      Its a good start if your SMSF does not require a loan as borrowing in an SMSF will complicate the process.

      We usually do a Declaration of Custody Trust to ensure the SMSF has a legally enforceable right to the overseas asset. So if your name appears on title for the overseas property, the Declaration of Custody Trust is the document noting it ultimately belongs to the SMSF.

      Apart from the cost of opening the SMSF and running it, we charge $950 for the trust as noted. More on fees here:

      https://www.smsfwarehouse.com.au/smsf-setup/costs/

      Trust this gives you the guidance needed.

      • Roshan Shah

        Thank you i am interested

  • Roshan Shah

    I am interested to setup self managed super.

    I am willing to buy land at overseas in Nepal. In nepal you have to buy land as in name. I am No resident of nepal and will able to buy land on my name.

    What will be procedure to buy overseas land through smsf and how much tome it will take to setup this.

    How much it will cost and do I have to open account in nepal.

    Thanks

    • superannuationwarehouse

      Roshan,

      We will set up a Declaration of Custody Trust, noting the SMSF is the owner of the property. We charge $950 to set this up.

      Best may be to have a bank account as well in the same country to receive rental income and pay for repairs and maintenance. We usually charge an extra $50 to have the bank account in the ultimate ownership of the SMSF as well.

      It will take is a day to set these up.

      Keep well,

  • prasadh s

    hi there,

    i am looking to register smsf and bare trust etc.,
    could you kindly give me a call on 0406 456 086 please to discuss investment plan in overseas asian country.
    Thanks,
    prasad

  • prasadh s

    hi there,

    i am looking to register smsf and bare trust etc.,
    could you kindly give me a call on 0406 456 086 please to discuss.
    Thanks,
    prasad

    • https://www.smsfwarehouse.com.au Superannuation Warehouse

      Prasad,

      To set up an SMSF, you can do it online here:
      https://www.smsfwarehouse.com.au/smsf-setup/

      We will give you a call now. Or if you want to call us, the contact numbers are listed here:
      https://www.smsfwarehouse.com.au/about-us/melbourne-office/

      We will call now.

      • SKY Super

        Hi There

        I know this thread is quite old however I am impressed with simplicity of contents and detail information provided for SMSF holder.

        I already have SMSF with corporate trustee. We are three friends are directors of that corporate entity.
        We are thinking to buy propoerty in India and invest in manged fund there.
        Indian las doesn’t allow the property title in the name of SMSF so I believe I need bare trust. I have NRI account in India.
        I am confused with how many bare trust do I need? (one for property, one for bank account , one for property in Australian )
        Can we have single bare trust accomodate all overseas and local property? Do we need a new bare trust everytime we buy a new propoerty?
        Who will own the title of the propoerty in India? Bare trust, Corporate trustee or myself as NRI?

        What will be the structure if I need to invest overseas in manage fund, shares or any private business?

        Would you please assist.

        • https://www.smsfwarehouse.com.au Superannuation Warehouse

          Sky Super,

          One Bare Trust can only have one asset in it.

          We would typically set up a Bare Trust to hold the property and another one to hold the bank account.

          Trust this makes sense.

          • Pankaj

            Make sense.
            So How could we buy prpoerty in India? Who will be on title, trustee, corporate tristee, super fund or bare trust? Moreover, when you send fund from Australia to India so we can purchase property, do we need that fund to be transferred into super account in India or any other account is fine?

          • https://www.smsfwarehouse.com.au Superannuation Warehouse

            Pankaj,

            Investing overseas via an SMSF is a technical area. If you are not sure what to do, don’t proceed.

            An SMSF must have a legal enforceable right to the asset it owns. This is the function of the bare trust, to ensure ownership.

            Trust this gives you the guidance needed.

  • SKY Super

    Hi There

    I know this thread is quite old however I am impressed with simplicity of contents and detail information provided for SMSF holder.

    I already have SMSF with corporate trustee. We are three friends are directors of that corporate entity.
    We are thinking to buy propoerty in India and invest in manged fund there.
    Indian las doesn’t allow the property title in the name of SMSF so I believe I need bare trust. I have NRI account in India.
    I am confused with how many bare trust do I need? (one for property, one for bank account , one for property in Australian )
    Can we have single bare trust accomodate all overseas and local property? Do we need a new bare trust everytime we buy a new propoerty?
    Who will own the title of the propoerty in India? Bare trust, Corporate trustee or myself as NRI?

    What will be the structure if I need to invest overseas in manage fund, shares or any private business?

    Would you please assist.

  • Blair

    Hi, We have a current SMSF set up and are looking at purchasing commercial property in NZ (I am a NZ citizen). We are looking at the purchase in conjunction with a friend who lives in Singapore and isn’t part of our SMSF so we wouldn’t be . We will look to borrow for the purchase.
    Is this something that is doable or can we only purchase property if the SMSF owns the property in its entirety? Thanks

  • Jeevan

    Hi Team,

    I am looking for account set up in India to be able to transfer from SMSF to Bare trust. Should the account be on Bare trust over in india?
    If Yes, Could you help us to set up account and guide me with required documents?

    Alternatively, transfer to an individual account holder who is trustee of the Bare/custodian will do?

    • https://www.smsfwarehouse.com.au Superannuation Warehouse

      Jeevan,

      Overseas countries will not know what an SMSF is. The purpose of the Bare Trust is to allow you as the Trustee of the Bare Trust to hold a property for the benefit of the SMSF.

      The SMSF owns 100% of a Bare Trust meaning the SMSF has full ownership of an overseas investment property. To see an example of a Bare Trust, see here:
      https://www.smsfwarehouse.com.au/smsf-investments/property/bare-trust/

      Trustees are generally responsible for the management of their owns SMSF’s and therefore you have to set up your own SMSF bank accounts, both here and overseas.

  • Arcenitte

    hello,

    I am planning to buy an outright property in Philippines. Residential Property for renting out. Does SMSF allow to buy a land only?

  • Philip Lockyer

    Hello

    I would like advice on the type of legal approach I can use
    to perform the following outcome.

    – I have an asset in the country of Vanuatu that is held as a share.
    – I would like to transfer this asset that I have a personal loan for into my SMSF by purchasing off myself.
    – I would then like to use SMSF contributions to pay off the debt.

    Can you please advise if there are products available to enable the process
    above the be completed legally with the Australian SMSF rules?

    Kind regards

    Philip Lockyer

    • https://www.smsfwarehouse.com.au Superannuation Warehouse

      Philip,

      An SMSF is generally not allowed to purchase assets from a related party. There are 2 exceptions to this, and this is for listed shares and commercial property.

      If the SMSF was to purchase this asset on the open market from a party not related to you, it is possible to proceed.

      Unfortunately bad news in this case as the SMSF can’t proceed with purchasing this share from you.

      • Philip Lockyer

        Thanks, what criteria will qualify real estate as Commercial property for SMSF purposes?

        Thanks, Phil.

  • Paul

    Hi

    I have a self managed superfund and want to buy an investment property in Romania.

    The property will cost $250k and I have approximately $800k in my fund.

    Can this be done? It will be just rented out until we retire.

    • https://www.smsfwarehouse.com.au Superannuation Warehouse

      Paul,

      The advantage of buying a property now is that you lock it in at today’s prices.

      When purchasing overseas property, make sure the SMSF has legal ownership of the asset. If its listed in your name but an asset of the Fund, make a Statutory Declaration or a Declaration of Trust noting the SMSF is the ultimate owner. Purchasing a property also needs to be listed as an authorised investment in the Investment Strategy of the Fund:
      https://www.smsfwarehouse.com.au/smsf-investments/strategy/

      Until such time as you retire, make sure the property is not used for personal purposes or by a related party.

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Superannuation Warehouse is an accounting firm and do not provide financial advice. All information provided has been prepared without taking into account any of the Trustees’ objectives, financial situation or needs. Because of that, Trustees are advised to consider their own circumstances before engaging our services.