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.
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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. If you’re looking for more personalised advice, have a chat with one of our experts at www.superguy.com.au/need-advice
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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
Hi Mark, generally the only asset that can be leased to a related party from a SMSF is business real property.
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In House Assets
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!
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.
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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
Hi Chris,
You usually cannot access your super until you have met your superannuation preservation age. If you are over your preservation age and working, you can have partial access via a TTR pension. If you have met a retirement condition of release, or reached age 65, you can generally have full access.
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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
Hi Ian, there are currenlty no restrictions on withdrawal from super for people over age 65. Just be mindful of potential changes to super rules and Centrelink assessment between now and when you reach age 66 1/2.
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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
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.
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
Hi Louis,
You are unable to borrow money from your super, but you may be able to partially access super if you are still working, once you have reached your super preservation age.
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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
Hi Lloyd, As your wife has met a superannuation condition of release, being over age 65, she has unrestricted access to her super.
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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
Hi Robert, I don’t believe you are able to transfer the car to yourself. You would need to purchase the car from the SMSF at market rates and under arms-length conditions.
See here for information on selling SMSF assets to a related party (including member of the Fund) https://www.ato.gov.au/super/self-managed-super-funds/investing/restrictions-on-investments/collectables-and-personal-use-assets/ (scroll to bottom)
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Hi Ian, I hope the article above can assist with your question
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
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.
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