Some SMSF rules are misunderstood so often that the wrong version starts to sound right.
This guide tests five common trustee assumptions against ATO guidance and the rules that actually apply. It covers work on fund property, carry-forward concessional contributions, tax after 60, crypto and buying assets from family. Each section ends with what to check before it costs your fund money.
It is general information only. It is not financial, tax, legal or audit advice.
For current caps and thresholds, see the SMSF Rules and Limits reference. For broader trustee duties, see the SMSF Trustee Obligations Guide.
Key Takeaways: 5 SMSF Rules Trustees Often Misread
- Free labour is not always free. If a trustee who is a tradie, a relative or a professional does substantial work on an SMSF property without charging market rates, the property’s income and any future capital gain can be taxed at 45% as non-arm’s length income (NALI).
- Carry-forward has a hard gate. Unused concessional cap amounts can only be used in a year where your total super balance was below $500,000 at the previous 30 June.
- Turning 60 makes many withdrawals tax-free, not everything. Fund earnings stay taxed at 15% unless they support a retirement phase pension, and the taxable component of super left to adult children is generally taxed.
- The ATO already holds exchange data. Its crypto data-matching program collects records on 700,000 to 1.2 million individuals and entities a year, including accounts held by super funds.
- Changing the wrapper does not change the rule. An SMSF cannot acquire residential property from a related party, and a family trust or company you control is a related party.
Myth 1: Can SMSF trustees do work on their own SMSF property?
The property repair assumption
Painting between tenants, replacing a fence, redoing the bathroom. It is your fund and your property, so doing the job yourself just saves the fund money. Where is the harm?
What the law says about free trustee labour
Since 1 July 2018, section 295-550 of the Income Tax Assessment Act 1997 has meant the NALI rules can cover what an SMSF spends, not just what it earns. If your fund pays less than a market rate for a service, including paying nothing at all, under an arrangement that is not at arm’s length, related income can be taxed at the top marginal rate of 45%.
The size of the hit depends on the type of expense. After the 2024 law change, a general fund-wide expense is broadly capped at twice the shortfall between what the fund paid and what it should have paid. A specific expense is different. Where the discounted expense relates to a particular asset, the ATO’s position is that all income from that asset is NALI. The ATO uses maintenance on a rental property as an example. Its ruling on these rules, LCR 2021/2, goes further: any capital gain when that property is eventually sold is NALI too.
There is one more sting for retirees. NALI cannot be treated as exempt current pension income, so a fund paying pensions can go from 0% tax on that income to 45%.
So can you do anything yourself?
Yes, and this is where the myth gets more interesting than “never touch it”.
Trustees cannot be paid for trustee duties. Because of that, the ATO accepts that work you do in your capacity as trustee, for no payment, does not trigger these rules. It presumes you are acting as trustee when the activity fits your trustee duties or powers, unless other factors point the other way.
Section 17B of the Superannuation Industry (Supervision) Act 1993 is also relevant. A trustee can be paid for non-trustee services only where the trustee is appropriately qualified, performs the work in the ordinary course of a business and is paid no more than an arm’s length amount.
The factors the ATO looks at include:
- whether you would normally charge for the work;
- whether you materially use your business’s equipment or staff;
- whether the work requires your trade licence or professional qualification; and
- whether the work is covered by your business’s insurance.
| Scenario adapted from ATO LCR 2021/2 | ATO outcome |
|---|---|
| A trustee who is a plumber connects a tenant’s water filter after work, using a few of her tools | Trustee capacity. Not NALI |
| The same plumber renovates the kitchen and bathroom of another fund property, books it into her work calendar, uses trade tools and brings her apprentice, and charges nothing | Individual capacity. The rent and any future capital gain on that property are NALI |
| A trustee who is a licensed real estate agent manages the fund’s rental through her agency at 50% of the normal fee | Individual capacity. The rent is NALI for each year the discount continues |
| A trustee does the fund’s bookkeeping and accounts without payment | Trustee capacity. Not NALI |
Routine trustee jobs like collecting rent or organising repairs are not the problem. The risk sits with professional or trade work done for free or at a discount. The trustee-capacity protection also does not help when the free work is done by someone who is not a trustee, such as an electrician son-in-law.
Worked example: what the renovation could cost
Say an SMSF owns a rental property earning $650 a week, or $33,800 a year. After $9,800 of deductible expenses, net rental income is $24,000. A trustee who is a builder renovates the property using his business’s tools and staff, and does not charge the fund.
| Arm’s length | Treated as NALI | |
|---|---|---|
| Net rental income | $24,000 | $24,000 |
| Tax, fund in accumulation at 15% | $3,600 | $10,800 at 45% |
| Tax, fund fully in retirement phase at 0% | $0 | $10,800 at 45% |
| Extra tax per year | $7,200 to $10,800 |
That is before any capital gain on sale, which could also be caught. The “free” renovation could end up being the most expensive work ever done on the property.
What to check before anyone touches the property
If you, your spouse or anyone in the family is a tradie, builder, property manager or other professional doing work for the fund, the fund should either pay a market rate from the fund’s bank account or use an independent contractor. Keep invoices with the property records. Your auditor may ask for them.
Myth 2: Can I use carry-forward contributions if my balance is over $500,000?
The carry-forward assumption
“I did not use my full concessional cap in previous years, so I can catch up whenever I like.”
What the law says about the $500,000 test
Carry-forward lets you use unused concessional cap amounts from up to five previous financial years. But under section 291-20 of the Income Tax Assessment Act 1997, you can only use them in a year where your total super balance was less than $500,000 at 30 June of the previous financial year. For 2026-27, that means your balance at 30 June 2026.
It is a hard threshold. At $500,000 or above, your concessional cap for 2026-27 is the general concessional cap of $32,500 and nothing more. There is no discretion and no averaging.
A few other details trip people up:
- unused amounts expire after five years;
- the oldest amounts are used first;
- contributions count in the year your fund receives them, not the year you send them; and
- carry-forward applies automatically once you exceed the general cap in an eligible year.
If you want to claim a deduction for a personal concessional contribution, you also need a valid notice of intent to claim a deduction and written acknowledgement from the fund. Do this before lodging your tax return, and before rolling over or withdrawing the contribution.
Worked example: $478,000 versus $502,000
Margaret is 58. Her employer has contributed $12,000 a year to her SMSF for the past five years, and she has made no other concessional contributions.
| Year | General cap | Contributed | Unused |
|---|---|---|---|
| 2021-22 | $27,500 | $12,000 | $15,500 |
| 2022-23 | $27,500 | $12,000 | $15,500 |
| 2023-24 | $27,500 | $12,000 | $15,500 |
| 2024-25 | $30,000 | $12,000 | $18,000 |
| 2025-26 | $30,000 | $12,000 | $18,000 |
| Total unused | $82,500 |
| Total super balance at 30 June 2026 | 2026-27 concessional cap | Room left after $12,000 employer contributions |
|---|---|---|
| $478,000 | $115,000 | $103,000 |
| $502,000 | $32,500 | $20,500 |
A $24,000 difference in balance on one particular day changes Margaret’s available cap by $82,500.
Why near $500,000 needs a closer look
Your total super balance is not always the same as your account balance in the fund’s accounts. It covers all your super interests across every fund. For SMSF members, it can also include a share of an outstanding limited recourse borrowing arrangement balance in some cases, for example where the loan is from an associate of the fund or you have met a condition of release with a nil cashing restriction.
ATO online services may not show your 30 June 2026 SMSF figure until the fund’s 2025-26 annual return has been lodged. If your balance was anywhere near $500,000, confirm the exact figure before making extra concessional contributions.
For broader contribution rules, see the SMSF Contribution Strategies Guide and the Contribution Caps Hub.
Myth 3: Is all super tax-free once you turn 60?
The tax-free-after-60 assumption
“Once I am 60, everything to do with my super is tax-free.”
What the law says about withdrawals, earnings and death benefits
The core of this is true. Withdrawals of the taxed element of your super, which covers almost everything in an SMSF, are tax-free from age 60. You still need to meet a condition of release, such as retirement, before you can take unrestricted money out.
But “my withdrawals are tax-free” is not the same as “my super is tax-free”. There are three places where tax can still apply after 60.
Fund earnings. Earnings on assets in accumulation phase are taxed at 15%, whatever your age. A transition to retirement income stream does not change that. Earnings supporting a TTR pension are also taxed at 15% until the pension enters retirement phase, which happens when you turn 65 or notify your fund that you have met a condition of release such as retirement.
What you leave behind. A lump sum death benefit paid to a tax dependant, such as a spouse or a child under 18, is tax-free. Paid to an adult child who is not financially dependent on you, the taxable component is generally taxed at up to 15%, plus the Medicare levy if paid directly to them.
If the death benefit includes insurance proceeds, section 302-145 can create an untaxed element. For adult non-dependants, that part can be taxed at up to 30%, plus the Medicare levy if paid directly to them.
Super still sitting in an untaxed scheme. Some public sector schemes never paid tax on contributions or earnings. Lump sums from an untaxed element can still be taxed after 60.
Very high balances from 1 July 2026. Division 296 applies from 1 July 2026 to realised earnings linked to total super balances above $3 million. It adds 15% tax to earnings attributable to the balance above $3 million, with a higher headline concessional rate for earnings attributable to balances above $10 million. It can apply regardless of whether the member’s money is in accumulation or retirement phase.
One clarification: if you rolled untaxed super into your SMSF, the tax was dealt with on the way in. The SMSF includes the untaxed element, up to the untaxed plan cap, in its assessable income in the year it arrives and pays 15% tax. After that, it is treated like the rest of taxed super, and withdrawals from age 60 are generally tax-free.
| Situation | Tax on fund earnings | Tax on payments |
|---|---|---|
| Accumulation phase | 15% | Withdrawals of taxed element tax-free from 60, condition of release required |
| TTR pension, not yet in retirement phase | 15% | Tax-free from 60 |
| Retirement phase pension | 0% on earnings supporting it, except NALI | Tax-free from 60 |
| Death benefit to adult, non-dependent child | Not applicable | Taxable component generally up to 15% plus Medicare levy if paid directly; untaxed element can be higher |
Worked example: the tax your children could pay
Graham dies with $900,000 in his SMSF. Of that, $150,000 is tax-free component and $750,000 is taxable component. The whole balance goes as a lump sum to his two adult children, neither of whom was financially dependent on him.
- Taxable component: $750,000
- Tax at up to 17% if paid directly to the children: up to $127,500
- Tax at 15% if paid to his estate for distribution to them: $112,500
Graham paid no tax on his own withdrawals after 60. His children could still face a six-figure tax bill.
For pension phase and estate planning context, see the SMSF Pension Guide and SMSF Death Benefits Guide.
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Myth 4: Can the ATO see crypto held in an SMSF?
The crypto visibility assumption
“Crypto is private. The ATO has no way of knowing what my fund holds.”
What the law says about exchange data
The ATO runs a crypto assets data-matching program using formal information-gathering powers, which means exchanges can be required to hand over data. The program covers every financial year from 2014-15 to 2025-26, and the ATO expects to collect data on 700,000 to 1.2 million individuals and entities each year.
The data it collects is detailed.
| Account details | Transaction details |
|---|---|
| Name, date of birth and addresses | Transaction dates and times |
| ABN for entities | Type and amount of crypto asset |
| Email and phone numbers | Amounts in Australian dollars and in crypto |
| Linked bank account details | Total account balance |
| Wallet addresses linked to the account | Transfer type and description |
Account holders can be individuals, companies, trusts or super funds. The ATO keeps each year’s data for seven years and uses it to prompt taxpayers and compare against its own records.
The reach is also set to widen. In December 2025, the government announced it will implement the OECD Crypto-Asset Reporting Framework and a domestic crypto reporting regime for Australian residents. The ATO expects the first international exchange of data under the framework in 2028. When the ATO published its summary, the measure was not yet law.
Self-custody wallets are different from exchange accounts. They are not directly reported in the same way, but exchange records can still show withdrawals to wallet addresses and later deposits back from those wallets. For an SMSF, the practical issue is record-keeping: the fund needs a clear audit trail from exchange account to wallet to annual valuation.
What an SMSF needs to get right
Visibility is only half of it. Crypto in an SMSF has its own rules:
- The wallet and exchange accounts must be in the SMSF’s name and separate from personal crypto.
- Every purchase, sale and transfer must be recorded.
- Sales and swaps are disposals for capital gains tax.
- Holdings must be valued at market value with records your auditor can verify.
- Crypto cannot be acquired from a related party. You cannot move crypto you own personally into your SMSF.
For more detail, see the SMSF Crypto Guide.
Myth 5: Can an SMSF buy property from a member or related party?
The related-party property assumption
“I own a rental property and my SMSF has cash sitting in it. Moving the property into the fund seems like a natural fit.”
What the law says about section 66
Section 66 of the Superannuation Industry (Supervision) Act 1993 generally prohibits an SMSF from acquiring assets from related parties. The exceptions are narrow. The asset must be acquired at market value and be one of the following:
- a listed security, such as shares or units listed on an approved stock exchange;
- business real property, which generally means land and buildings used wholly and exclusively in a business;
- an in-house asset, where the acquisition does not push the fund’s in-house assets above 5% of total assets; or
- an asset that is specifically excluded from being an in-house asset.
Residential investment property is not on the list. You cannot sell it to your SMSF, transfer it in, or contribute it in specie. The breach happens at acquisition, so moving the property back out later does not undo it.
Does holding it in a trust or company change anything?
No. Related parties of an SMSF include every member of the fund, each member’s relatives, business partners and connected entities, and any company or trust the member or their associates control or influence.
So if your rental property sits in a family trust, a discretionary trust where you or your spouse are the appointor, or a company you control, the entity holding it is a related party. The prohibition applies in the same way.
The question that matters is always about the asset, not the wrapper around it. A residential property held in a family company is still a residential property.
| Asset | Generally allowed from a related party? |
|---|---|
| Residential rental property | No |
| Holiday home | No |
| Commercial premises used wholly and exclusively in a business | Yes, at market value |
| Farm with a home, where the dwelling is on 2 hectares or less and the main use is not private | Can qualify as business real property |
| Shares or units listed on an approved stock exchange | Yes, at market value |
| Shares in your private company | Generally no, except within the 5% in-house asset limit |
| Crypto assets | No |
For property-specific rules, see the SMSF Property Guide, especially the related-party and business real property sections.
The Five Myths at a Glance
| The assumption | What actually applies | Where to check |
|---|---|---|
| Doing work on fund property yourself just saves money | Trade or professional work done free or at a discount can make the property’s income and capital gain NALI at 45% | Who did the work, and was it invoiced at market rates? |
| Carry-forward is always available | Only if your total super balance was below $500,000 at the previous 30 June | ATO online services, or your 30 June member statement |
| Everything is tax-free after 60 | Withdrawals are. Accumulation and TTR earnings, and death benefits to adult children, can still be taxed | Your pension’s phase, and your taxable component |
| The ATO cannot see crypto | Exchanges report detailed account and transaction data, including for super funds | Wallet names, records and annual return |
| A trust or company gets around related-party rules | Entities you control are related parties | The asset type, not the holding structure |
Frequently Asked Questions
Can I do any work on my SMSF property myself?
Generally, yes, if you are acting as trustee. The ATO accepts that unpaid work done in your capacity as trustee, like organising repairs, collecting rent or a minor one-off job, does not trigger the non-arm’s length expense rules. The risk arises when the work draws on your trade, licence, business equipment or staff, or when a non-trustee such as a relative does work for free.
What happens if my total super balance is exactly $500,000?
You cannot use carry-forward that year. The ATO’s test is a total super balance of less than $500,000 at 30 June of the previous financial year, so $500,000 on the dot does not qualify.
Do unused concessional cap amounts expire?
Yes. Each year’s unused amount is available for five years and then expires. The oldest amounts are used first. If you have unused amounts from 2021-22, they must be used by the end of 2026-27.
Is my transition to retirement pension tax-free once I turn 60?
The payments you receive are tax-free from 60. The fund’s earnings on the assets supporting the pension are still taxed at 15% until the pension moves into retirement phase, either when you turn 65 or when you notify your fund that you have met a condition of release such as retirement.
Is super paid to my adult children taxed?
If they were not financially dependent on you, the taxable component of a lump sum death benefit is generally taxed at up to 15%, plus the Medicare levy if it is paid to them directly. Any tax-free component is received tax-free. Death benefits paid to a spouse or a child under 18 are generally tax-free.
Can I transfer crypto I own personally into my SMSF?
No. Crypto assets are not listed securities, so an SMSF generally cannot acquire them from a member or other related party. The fund has to buy crypto in its own name, through its own account.
Can my SMSF buy my business premises?
It may be able to. Commercial property used wholly and exclusively in a business is business real property, which is an exception to the related-party acquisition rule. It must be acquired at market value, and any lease back to your business needs to be on arm’s length terms.