If you are purchasing property through your self-managed super fund in Victoria, you will receive a Section 32 Vendor Statement before you are asked to sign the Contract of Sale. This document is mandatory under Victorian property law and contains disclosures about the property that every buyer must review before proceeding.
For SMSF trustees, the Section 32 review carries an additional layer of complexity. The consequences of overlooking certain details can compromise your LRBA structure, trigger unexpected costs, or delay settlement at a critical time. This article explains what the Section 32 is, why it matters more for SMSF buyers, and what trustees should examine closely.
What Is a Section 32 Vendor Statement?
A Section 32 Vendor Statement is a legal disclosure document that a seller (vendor) in Victoria must provide to a buyer before the buyer signs a Contract of Sale. It takes its name from Section 32 of the Sale of Land Act 1962 (Vic) and is a requirement specific to Victoria. No equivalent document exists in other Australian states.
The Section 32 contains information about the property’s title, encumbrances, planning restrictions, zoning, building permits issued in the last seven years, outgoings (including council rates and water rates), and any owners corporation obligations. It is the vendor’s legal obligation to disclose accurately. If the Section 32 is defective or materially incomplete, the buyer may have the right to rescind the contract at any time before settlement.
The document applies equally to residential property, commercial property, and vacant land transactions.
Why the Section 32 Matters More for SMSF Buyers
Standard buyers review the Section 32 primarily to assess the property itself: its title, restrictions, and ongoing costs. SMSF trustees must do all of this, and also consider how the information disclosed affects the SMSF’s compliance obligations, the lender’s assessment of the property, and the LRBA structure.
Three issues arise specifically for SMSF buyers that do not concern standard purchasers.
The property must meet lender eligibility criteria. Not all properties are acceptable security for an SMSF commercial property loan or residential SMSF loan. Specialised properties (service stations, childcare centres, or properties with significant heritage overlays or environmental encumbrances) may not be acceptable assets or attract a significantly lower loan-to-value ratio from lenders, even if they meet the ATO’s eligibility rules. Reviewing the Section 32 before exchange allows you to identify potential lender issues before you are contractually committed.
The bare trust structure depends on correct contract preparation. In an LRBA purchase, the Contract of Sale must name the bare trustee as the purchaser from the outset. If the Section 32 or contract is presented in the SMSF trustee’s name and this is not corrected before signing, reversing it can be costly, slow, or in some cases impossible without triggering stamp duty and a renegotiation of the purchase. This is the most common and most expensive structuring mistake in SMSF conveyancing.
Owners corporation and outgoing obligations must be assessed against the fund’s liquidity. An SMSF must maintain adequate liquidity to meet its obligations, including loan repayments, insurance, member benefits, and administrative costs. If the Section 32 reveals significant owners corporation levies, outstanding special levies, or high annual outgoings, these must be modelled against the fund’s projected cash position before exchange.
What SMSF Trustees Must Check in a Section 32
Review the following sections of the Section 32 with particular attention.
Title and encumbrances. Confirm title is clear of caveats or encumbrances that would prevent the bare trustee from taking clean legal title at settlement. Any charge or caveat affecting the title must be resolved before settlement can occur.
Zoning and planning overlays. Confirm the property’s zoning is consistent with the intended use. For commercial SMSF purchases where the property will be leased to a related business, verify that the permitted use aligns with the business activity. A planning overlay (heritage, vegetation protection, or flooding) can affect the lender’s willingness to lend and the property’s future value.
Building permits. Check all building permits issued in the last seven years. Unpermitted works can create compliance obligations and affect the lender’s valuation. For SMSF purchases, improvements funded outside the LRBA after purchase must be distinguishable from improvements present at the time of purchase.
Owners corporation documents. If the property is a unit, warehouse complex, or strata title, the Section 32 should include the owners corporation certificate. Check the annual levy, any outstanding special levies, and the financial health of the sinking fund. These costs must be met from the SMSF’s cash.
Land tax. Confirm the land tax clearance certificate confirms no outstanding land tax liability. Land tax liability passes to the buyer at settlement if not cleared.
The Most Important Rule: Do Not Sign Before the Structure Is Ready
At auctions and in competitive private sale situations, there is often pressure to sign quickly. For SMSF buyers, signing a contract before the bare trust structure is in place, or before the correct purchaser name is confirmed with your solicitor and lender, is a serious risk.
Unlike standard property purchases, changing the purchaser name on an SMSF contract after signing can trigger a cancellation and re-execution of the contract, additional stamp duty on both transactions, and loss of the original purchase price if the vendor does not agree to a variation.
Prior to signing the contract of sale, a conveyancer or solicitor who specialises in SMSF structures should be engaged. A key part of the review is ensuring that the asset is considered to be a “Single Acquirable Asset”. An LRBA can only be used to acquire a single acquirable asset (or a collection of identical assets treated as one under the SIS Act). Before issuing unconditional approval, lenders review the Section 32 Vendor Statement to confirm exactly what is being purchased. This allows them to assess the title, improvements, easements, leases, zoning and any other matters that could affect whether the property qualifies as a single acquirable asset and meets both legislative and lending policy requirements.
The practical solution is to engage your SMSF lending broker and solicitor before you begin inspecting properties, so that the bare trust deed and lender pre-approval are ready to deploy when you find the right property. SMSF Mecca works with specialist SMSF solicitors and conveyancers as part of the loan application process to ensure the structure is in place before you commit. Read more about how SMSF property investment works through our finance brokerage.
Frequently Asked Questions
Is a Section 32 Vendor Statement required for all Victorian property purchases?
Yes. Under the Sale of Land Act 1962 (Vic), a vendor must provide a Section 32 Vendor Statement to every buyer before the buyer signs the Contract of Sale. This applies to residential property, commercial property, and vacant land. Failure to provide a compliant Section 32 gives the buyer the right to rescind the contract at any time before settlement.
What happens if an SMSF signs a contract in the wrong name?
If the Contract of Sale is executed in the SMSF trustee’s name rather than the bare trustee’s name, the LRBA structure may not be compliant. Correcting this error may require the vendor’s agreement to a contract variation, which can trigger an additional stamp duty assessment, delay settlement, and in some cases affect lender approval. Engaging an SMSF solicitor before signing eliminates this risk.
Can an SMSF purchase a property at auction in Victoria?
Yes, but it requires careful preparation. At auction, the Contract of Sale is unconditional from the moment of signing. The bare trust deed and the correct purchaser name must be confirmed with your solicitor and lender before auction day. The finance condition is also absent in an auction contract, meaning the fund must have finance approval in place before bidding.
Does the Section 32 cover GST on commercial property?
Not directly. The Section 32 does not contain a GST analysis. However, for commercial property purchases, GST obligations must be assessed separately. If the property is not sold as a going concern, GST of 10% may apply to the purchase price. This is a significant additional cost for the SMSF and must be budgeted for alongside stamp duty and other acquisition costs.
Purchasing property through your SMSF in Victoria? SMSF Mecca Finance coordinates your SMSF loan application, bare trust establishment, and lender panel access from a single point of contact. Book a strategy call before you begin your property search.