Can I use a Buyers Agent for my SMSF?

Yes, an SMSF can engage the services of a specialist buyer’s agent to seek out suitable property investments for the fund.

What does an SMSF buyer’s agent do?

A buyer’s agent will find out what sort of property the buyer wants, their budget and their short-term and long-term goals. A buyer’s agent must be a licensed real estate agent and act exclusively for the buyer and not the vendor.

A buyer’s agent will pinpoint growth areas and help the SMSF trustee to select a suitable property for their budget with good returns, long-term tenants and capital growth. They have access to off-market properties and discounted pre-sales from developers. The agent will negotiate the best price for the property purchase.

Depending on the buyer’s budget and property selection the agent can carry out due diligence on the property and provide an appraisal on the market value and then negotiate the property purchase or attend an auction and bid on behalf of the buyer. Furthermore, they can liaise with the buyer’s solicitor or conveyancer and do a pre-settlement inspection.

In addition to the above a buyer’s agent who specialises in SMSF properties will understand the SMSF legislation having regard to:

• Bare trusts /limited recourse borrowing arrangements (LRBA)
• ensuring your property purchase fits within the fund’s investment strategy
• prohibitions from acquiring property from a member or other related party unless it is business real property
• SMSFs acquiring commercial property from an SMSF member and leasing it back to a related party
• the requirement for the SMSF trustee to independently decide on the acquisition of a property for the sole purpose of providing retirement benefits to its members

How much does a buyer’s agent charge?

Fee structures vary and can include:

• commission based, generally in the vicinity of 1-3% of the purchase price
• a fixed flat fee which is not dependent on the value of the property
• tiered pricing model which involves varying fees based on the property value
• a hybrid model that begins with a percentage as a reference, transitioning to a fixed price once the agent has determined the specific services required by the SMSF
• upfront retainers which can be 20% to 50% of the total fee which is deducted from the final fee but is non-refundable if not successful

Can my SMSF deduct the buyer’s agent fees?

There is no immediate tax deduction available as the agent’s service is capital in nature and generally forms part of the property’s cost base in relation to capital gains tax. However, it will depend on the service provided and a successful purchase of the property.  A non-refundable upfront fee is a blackhole expense when the property purchase is unsuccessful. It does not form part of the cost base and is not revenue in nature and therefore, is not tax deductible and is written off as a non-deductible expense.

Considerations in appointing a buyer’s agent for your SMSF

Consider the following when looking for a buyer’s agent for your SMSF:

1. Is the buyer’s agent licensed?

A real estate license, or equivalent, is required to act as an agent for a prospective purchaser.

Check with Australian Competition & Consumer Commission (ACCC).  Real estate laws come under the authority of individual states and territories.

State or Territory	Link to relevant guide or legislation
NSW – Fair Trading	Using a real estate agent to buy property
QLD – Office of Fair Trading	Real estate agent licence or registration
SA – Office of Consumer and Business Services	Land agent registration Check occupational licence holders
TAS – Consumer, Building and Occupational Services	Real estate agents
VIC – Consumer Affairs	Licensing – estate agents
WA – Consumer Protection	Real estate agents, property managers and sales representatives
Access Canberra	Licensing for business, real estate and stock and station agents
NT Consumer Affairs	Agents Licensing Act 1979

2. Independence

The agent’s license requires them to declare any commissions they receive from realtors, builders, developers, mortgage broker or other 3^rd parties.  A conflict of interest can mean your SMSF does not get the best deal.

3. Fee Structure

Typically, an agent will charge a fee which is dependent on the services provided which are wide ranging and can include property search, evaluation of the property, auction bidding, inspecting properties and access to off-market properties.