How to Use Your Superannuation to Invest in Land

Your journey begins with professional advice, not with a payment to Vertical Village.

If you are considering using your superannuation for a land investment, your first step is to contact an accountant experienced in SMSF administration and a financial adviser appropriately licensed to provide SMSF advice.

Your advisers should help you understand:

• Whether establishing an SMSF is appropriate for your financial situation.
• How much superannuation you currently hold.
• The costs and responsibilities of managing your own super fund.
• Whether an investment in a cooperative land project could be legally permissible.
• Whether you have sufficient funds for the proposed investment and ongoing SMSF expenses.
• The investment risks, including possible delays, limited liquidity and potential capital losses.
• The effect of transferring your superannuation on your existing insurance and retirement arrangements.

An SMSF is not simply another bank account. It is a regulated superannuation trust established to provide retirement benefits.

If professional advice confirms that an SMSF is suitable, your accountant and SMSF establishment professionals can assist with the setup process.

An SMSF is a trust, not a company. However, many SMSFs use a specially established company as their corporate trustee.

A typical establishment process includes:

1. Establishing the SMSF trust and preparing its trust deed.
2. Registering a corporate trustee with ASIC, if that structure is selected.
3. Appointing the SMSF members as directors of the corporate trustee, subject to eligibility requirements.
4. Obtaining an Australian Business Number (ABN) and Tax File Number (TFN) for the SMSF.
5. Registering the SMSF with the Australian Taxation Office (ATO).
6. Preparing an appropriate written investment strategy.
7. Completing the required trustee declarations and compliance documentation.

What happens next?

Once the SMSF has been properly established and registered, its trustees can arrange banking facilities and prepare for any eligible superannuation rollovers.

After establishing the SMSF, the trustee will need a dedicated bank account for the fund. The account must be appropriately titled and operated for the SMSF. Where a corporate trustee is used, the account will generally identify the corporate trustee acting on behalf of the SMSF.

The bank may request:

• The SMSF trust deed.
• Corporate trustee registration details, where applicable.
• SMSF ABN and TFN information.
• Identification for trustees and authorised signatories.
• Other documentation required under the bank's policies.

This bank account is used to receive eligible rollovers and contributions, pay fund expenses and make authorised investments. SMSF money must remain separate from your personal money and the money of any other business or company.

Once the SMSF is properly registered, eligible to receive rollovers and has an operational bank account, you can arrange to transfer eligible superannuation balances from your existing super fund. This process is called a superannuation rollover.

For example, if you currently have superannuation with a retail, industry or other complying super fund, you may be able to transfer some or all of your eligible balance to your SMSF.

Before requesting a rollover, check:

• Whether your existing superannuation benefits can be transferred.
• Whether you would lose insurance cover.
• Whether your existing fund has any restrictions or special benefits.
• Whether the SMSF is listed as eligible to receive rollovers.
• Whether enough money will remain available to meet your retirement and insurance needs.

How long does this take?

Allow sufficient time for establishing the SMSF, registering it with the ATO, opening its bank account and completing the rollover. For planning purposes, some people may allow approximately 12–14 weeks for the overall setup and transfer process, although this is not a standard or guaranteed timeframe.

Before making any payment, obtain the relevant Vertical Village project documents and provide them to your independent SMSF advisers. Your accountant, licensed financial adviser and SMSF solicitor should review the proposed investment.

This review must establish:

• The precise legal interest that the SMSF would acquire.
• Whether the investment is in land, units in a trust or another type of financial interest.
• Whether the SMSF is permitted to acquire and hold that interest.
• Whether the investment satisfies the sole purpose test and the SMSF's investment strategy.
• Whether related-party, in-house asset or non-arm's-length transaction rules apply.
• Whether any proposed future subdivision or allocation arrangement is compatible with SMSF rules.
• Whether the investment is appropriately valued and documented.
• Whether the SMSF has sufficient liquidity for its other obligations.
• Whether the investment can be sold or transferred and what restrictions apply.

This is a critical stage. Not every property-related investment is suitable or lawful for an SMSF.

If the proposed investment is legally permissible and your SMSF trustee decides to proceed, the next stage is completing the required project documentation. Depending on the investment structure, this may include:

• An investment application in the correct SMSF trustee name.
• The relevant project agreement or unit subscription documents.
• Identification and verification of the SMSF trustee.
• SMSF registration and trustee details.
• Applicable legal and financial disclosures.
• Independent professional approvals and any other required documents.

The investment documents must correctly identify the legal investor. For example, where an SMSF uses a corporate trustee, the investor may be recorded as:

[Corporate Trustee Pty Ltd] ATF [Your SMSF Name]

The final wording should be confirmed by the fund's solicitor.

Once all legal checks, documentation and approvals are complete, the SMSF trustee may arrange payment for the authorised investment. The payment would generally be made from the SMSF's dedicated bank account to the verified bank account specified in the approved investment documents.

Although the electronic banking process may look similar to an ordinary bank transfer, an SMSF payment is not a personal transaction. The trustee must ensure that:

• The investment has been properly authorised.
• The receiving account has been independently verified.
• The payment matches the investment agreement.
• The transaction is recorded in the SMSF's accounting records.
• The SMSF receives appropriate evidence of its investment interest.

Do not transfer SMSF money to an individual's personal account or make an advance payment while the legal investment structure remains unresolved.

Suppose the proposed investment requires $190,000, but your SMSF has only $150,000 available. You may wonder whether you can contribute the remaining $40,000 from your personal savings.

It is important to understand that personal money and SMSF money cannot simply be combined in a single personal land purchase. Possible arrangements may include:

Option A — Make an eligible contribution to your SMSF

Subject to contribution limits, eligibility rules and professional advice, you may be able to contribute personal money into your SMSF. The SMSF could then potentially make the investment using its own funds.

Option B — Consider a separately documented ownership arrangement

In some circumstances, a legally structured co-investment may be possible. However, related-party rules, title arrangements, investment restrictions and the nature of the project must be carefully reviewed.

Option C — Invest personally instead of through an SMSF

If the proposed SMSF investment is not permitted or appropriate, you may consider whether a separate personal investment is suitable. Any personal investment must remain legally distinct from an SMSF investment unless an appropriately advised structure permits otherwise.

After the investment has been validly accepted and the required payment has been received, the SMSF trustee should receive documentation confirming its investment interest. Depending on the final legal structure, this could include:

• An official payment receipt.
• A completed investment agreement.
• A unit holding confirmation or certificate, where applicable.
• Details of the SMSF's recorded investment.
• Information on future reporting and distributions, if any.
• Relevant updates about the project's progress.

Your SMSF accountant will generally need these records for the fund's annual accounts, valuation requirements and independent audit. The SMSF trustee remains responsible for managing the investment in accordance with superannuation law.