Can You Use Your Super To Buy A Car

Are you wondering if you can use your super to buy a car?

Most standard superannuation funds have a limited investment menu.

These options usually include managed funds, term deposits and possibly ASX-listed shares.

A self managed superannuation fund (SMSF) provides much greater flexibility in relation to investment options.

However, SMSF investments need to remain within the permissions of superannuation legislation, regulations, the SMSF Trust Deed and the SMSF Investment Strategy.

SMSFs trustees can invest in assets such as direct real property, physical commodities (such as gold, silver, etc) and even artworks.

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It is important to remember that investments must always be made for the benefit of the member/s.

In other words, an asset should be invested in for the purposes of producing an investment return for the member to help achieve their retirement needs.
 

Can You Use Your Super To Buy A Car?

 
You can use your super to buy a car. However, the purchase of the car must be for the benefit of members and cannot prove a present day benefit.

Specifically, the Superannuation Industry (Supervision) Regulations 1994 outline the rules of an SMSF purchasing collectables and personal use assets, such as a car.

The rules around using your super to buy a car are outlined in Regulation 13.18AA – Investment in collectables and personal use assets.

If you do not have a SMSF, you will be limited to the investment options provided by your superannuation provider, which will not include the option of buying a car.

If you have a SMSF, you will not only be a member of the SMSF, but you will also be the trustee of the SMSF.

The trustee of a superannuation fund decides on the investments available to members, within the constraints of super legislation and regulations.

It is imperative a trustee of a SMSF is aware of their responsibilities associated with being a trustee.

Reading the Introduction for SMSF Trustees – running a SMSF published by the ATO is a good starting point in understanding your responsibilities.

A trustee of a SMSF will outline the permitted investments within the SMSF Investment Strategy.

A vintage car, for example, could be part of the permitted investments within the SMSF.

A vintage car falls within the definition of a collectable and personal use asset.

Like all investments of a SMSF, the asset must not provide a present day benefit.

In relation to buying a car, the car cannot be driven by, or put on display for the benefit of, a member of the SMSF, a trustee of the SMSF, or any related party of the SMSF.

If you use your super to buy a car that is owned by your super fund, the car cannot be stored at the primary residence of a member or trustee of the SMSF, or a related party.

In no circumstances can the car be driven by a related party of the SMSF.

A Related Party is defined in Section 10 of the Superannuation Industry (Supervision) Act 1993.

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There are also further requirements when buying a car with your super.

These requirements relate to leasing, insurance and selling the car.

The car can only be leased to an unrelated party of the SMSF under an arm’s-length arrangement.

Within seven days of acquiring a car for investment within super, the car must be insured under the name of the SMSF.

When the car owned within in super is sold, it must be sold at market price as determined by an independent valuer.

A collectable or personal use asset can be sold to a related party of a SMSF.
 

Risk Of Using Super To Buy A Car

 
If you, in your capacity as trustee of a SMSF, have decided to invest in a car, you need to be aware of the risks.

Some of the risks of using super to buy a car include, but are not limited to:

Liquidity – buying a car within super reduces access to cash that can be used to assist with the general running cots of the SMSF, or even to cover cash flow obligations, such as pension payments.

It may also be difficult to sell a car to free up these funds.

What would happen if a member of the SMSF passed-away and their benefits needed to be paid out of the SMSF?

How would the death benefit be funded if the car couldn’t be sold?

Cash flow – Owning a car within super might require ongoing costs, such as storage, insurance, maintenance, etc.

The SMSF will need to ensure that it has adequate inflows to cover these costs, as well as other costs of running the SMSF.

Investment Returns – no investment returns are guaranteed. How likely is it that the car purchased will produce returns in line with expectations?

If the car does not produce returns in line with expectations, such as increase on value or leasing rate; how will that affect the ability of members to achieve their retirement objectives?
 

Can You Use Your Super To Buy A Car To Drive?

 
The only way to use your super to buy a car to drive is by first withdrawing your super into your personal bank account.

In order to do this, you need to have first met a superannuation condition of release.

An example of a superannuation condition of release includes meeting the superannuation definition of retirement or attaining age 65.

This would allow you to access your super and use your super to buy a car.

You can also start a transition to retirement income stream (TRIS) while you are still working once you have reached your superannuation preservation age.

A TRIS gives you the ability to withdraw between 4% and 10% of your TRIS balance each financial year.

This may provide you with adequate funds to use your super to buy a car.

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In all instances, when using your super to buy a car to drive, you super must first be withdrawn from your account into your personal bank account, before the car is purchased.

Under no circumstance can you use your super to buy a car to drive by purchasing the car within super, whereby your super fund is the owner of the car.

When making withdrawals from super, you always need to consider the tax implications.

The tax on super withdrawals are determined by your age and the tax components that make up your balance.

In relation to tax components, the tax-free element will always be received tax-free regardless of age.

Tax on the taxable element differs depending on whether you are under or over age 60.
 

Using Super To Pay Off Debt

 
Similar to purchasing a car to drive, or buying a house to live in, you can only use your super to pay off personal debt if you first withdraw it from super.

To withdraw your savings from super, you need to meet a superannuation condition of release.

Once savings are withdrawn from super, it is up to you how the savings are used.

You can use the withdrawal amount to pay off debt, start a business, buy a car for personal use or even buy a house to live in.

Chris Strano

Chris Strano created SuperGuy to help the average punter navigate through the complex and ever-changing super rules. It has since become one of Australia's leading digital super resources. Subscribe to SuperGuy's YouTube channel for the latest strategies to boost your super savings. https://www.youtube.com/c/superguyau

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20 Comments

  1. mark comiskey

    Hello Chris,
    i have a SMSF and a small business as a sole trader. Can i buy a work vehicle with my SMSF and lease the vehicle from my SMSF where in the SMSF makes money off the lease

    Reply
  2. Jam

    Hi Chris, I am a single mum on a pension with 2 under 2yrs and I just totalled our last car (a bomb) I have a letter saying I am in financial hardship being on benefits longer than 26 weeks. Can I withdraw super to buy another car? We aren’t managing very well without one!

    Reply
    • Chris Strano

      To access your super under the severe financial hardship provisions, you need to be in receipt of government income support payments for 26 weeks and be unable to meet reasonable and immediate family living expenses. If you satisfy this condition, you can access between $1,000 and $10,000 of your super as a lump sum. You can only access super under the severe financial hardship rules once in every 12-month period. The taxable (taxed) component of your lump sum withdrawal will be taxed at the lower of your marginal tax rate and 22%. Any tax-free component will be received tax free. You should contact your super provider to find out the tax components that make up your balance and to see if you are elegible to make a withdrawal. You should also consult a tax accountant prior to making any withdrawals to ensure you understand any tax implications.
      Related Posts:
      Can I Access My Super Under Sever Financial Hardship?
      Accessing Super – Here’s Your Options
      How To Access Your Super Before Retirement

      Reply
      • Chris

        Hi Chris

        Can I access some of my super to purchase a new or used car as I’m unable to afford one on my current pay rate due to other financial depts needing to be paid off first

        Reply
  3. Ian

    Hi
    I have just consolidated all my superannuation accounts at age 63. My plan is to buy a house to live in as I am currently renting. If and when I reach the retirement age of 66yrs 6 months am I able to use all of my accumulated superannuation and receive the aged pension with basically that purchase being my only asset at around $400 K

    Reply
  4. Rebecca

    Can I borrow from my super to afford to pay a bond to move in new place and to get a car. We have to move in a month due to house we live in is up for sale and we are only on my wage

    Reply
    • Chris Strano

      Hi Rebecca, generally you are only permitted to access a lump sum from your super if you have met the superannuation definition of retirement, such as permanent retirement after reaching your super preservation age, or attaining age 65. If you have reached your superannuation preservation age, but are still working, you should be able to start a TTR pension, which provides you with limited access via an income stream. If you are under your preservation age, you can generally not access your super.

      Reply
  5. louis

    I’m 57 can i borrow money from my super to buy a car my old car is getting weak i drive at least 75 km everyday to go to work i need to buy another it leaking oil

    Reply
  6. Lloyd

    Chris
    My wife is 65 and I turn 65 in November. We have a self managed super fund which we are closing. Are we able to utilise the funds from this fund to purchase a vehicle in advance when we both retire next year. We both have alternate super to the SMSF

    Reply
  7. Robert

    Hi Chris,
    I have a SMSF which has purchased a collectable car, at which age can the car be transfered to me so i am able to drive and enjoy it? I am currently 50

    Reply
  8. Ian Wayne Barber

    How to get a car with your super

    Reply
    • Chris Strano

      Hi Ian, I hope the article above can assist with your question

      Reply
  9. Wayne

    I want to take money to buy a car with some of my super I’ve been on work cover for 9 yrs and I need to buy a good car to get around in I don’t want to use to much I just want to use this money

    Reply
    • Chris Strano

      Hi Wayne, in order to access you super you need to meet a superannuation condition of release. Here is a list of conditions of releases.

      Generally, if you are under your superannuation preservation age you cannot access your super to buy a car, unless you are totally and permanently disabled.
      Related Posts
      What is My Superannuation Preservation Age?

      Reply

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