The ability for SMSFs to borrow to acquire new property has also contributed to the popularity of this asset class as it offers trustees an opportunity to acquire property which they may not otherwise be able to buy outright. Borrowing may also allow an SMSF to achieve greater asset diversification as a smaller proportion of the fund’s assets are required to be invested in property rather than directing a large portion of the fund’s assets into the one lumpy asset.

Borrowing in your SMSF can be complex and the risks associated with gearing may mean it is not a suitable strategy to achieve your retirement goals. In this article, we consider some of the benefits that gearing can deliver along with the associated risks.