SMSF Lending

So, you’ve got a SMSF or you’re thinking about setting one up? Whilst there are a number of investment solutions that can help you grow your retirement nest egg, leveraging property in your SMSF is one that has become increasingly popular. This is where we can help.

SMSFs can utilise their available cash to borrow money to purchase residential or commercial investment property; the property is then held in trust for the SMSF until the loan has been repaid.

The benefits of SMSF lending:

• there are some potential tax-benefits for borrowing within your SMSF for investment purposes, in some cases making it more attractive than personal lending;
• if the SMSF is borrowing to purchase business real property on behalf of your business, it means your business can free up its own capital which can then be reserved for future growth;
• the lending arrangement available to an SMSF means your other assets within the fund are protected;
• it offers further diversification of your investments held within the SMSF.

SMSF lending is acquired through a limited recourse borrowing arrangement (LRBA). This means, should the lender need to recover the funds borrowed by the super fund, it is limited to accessing the property only, therefore, in the event of a default, other assets within the super fund are not at risk.

The serviceability of the loan will be addressed using a combination of the rental income from the investment property itself, regular income from other assets within the fund, as well as contributions made by the members to the SMSF.

It’s important to note, purchasing a property inside an SMSF must meet certain ATO guidelines, including:

• the property must be acquired or disposed of at an arm’s length basis, meaning, the members of the SMSF, or anyone associated with the members, cannot receive personal benefit for holding or disposing of the property; and
• the property must meet the sole purpose test, which is to provide retirement savings to the fund members;
• the property cannot used by the member’s, or associated parties, for personal use, the exception is where a commercial arrangement is in place.

For more information or to apply for an SMSF loan, contact us, we would love to hear from you and to help you find the right lending solution to achieve your SMSFs investment goals.