SMSF Loans

SMSF Loans

Self-Managed Superannuation Fund

A SMSF is a trust that can be set up to manage your own superannuation. Like a normal super fund, your employer contributions still get paid into the fund and you can make additional contributions as you see fit. Please refer to contribution threshold.

However, unlike a normal super fund, the trustee (either you or your company) has direct control over the assets that your superannuation is invested in.

  • Standard SMSF Investment Loans: Up to 75% of the property value.
  • Standard investment loan rates may be available: Your SMSF structure must meet certain criteria.

Lending via SMSF

There are laws restricting the use of SMSFs to borrow money, and restricting the recourse of the lender in the event that the trust cannot meet its repayment obligations.

A basic outline of the rules a trust must follow in order to borrow money, is as follows:

  • The asset is an asset the SMSF could otherwise legally acquire (if it had the funds).
  • The asset is held on trust for the SMSF using a security trust (known as a security custodian or bare trust).
  • The SMSF acquires a beneficial interest in the asset from the outset.
  • The SMSF has the right to acquire legal title from the security trustee upon making all loan repayments.
  • The lender is limited to one asset in the event of a default. This means the lender must not be able to claim on any other assets of the fund.
  • Each borrowing arrangement can only be for a “single acquirable asset”. For strata title or subdivisions, each title is considered a separate asset.

Things to consider before setting up a SMSF

  • Setting up a Self Managed Super Fund is a big decision. Before setting up A SMSF you need to consider the following:
  • Will it save you money?
  • Is there any benefits that you will lose going through a managed fund versus a SMSF?
  • Do you have the knowledge and understanding around legislative changes to remain compliant and ensure that you get the best return on your investment?
  • Can you invest your super funds effectively?
  • Do you have the time to manage the SMSF administrative obligations, including record keeping and taxation?
  • Have you sought financials advice regarding the set up of your SMSF?

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