SMSF Loans
We help you use your SMSF to borrow
SMSF Loans
We help you use your SMSF to borrow
SMSF Property Loans
The latest trend in the investment world is the opportunity for a Self-Managed Super Fund (SMSF) to borrow to purchase fund assets, typically an investment property, using a limited recourse borrowing arrangement (LRBA).
If you run an SMSF, you can invest in all types of real estate, including residential property, commercial property, industrial property and even a farm (under certain circumstances).
However, the ATO has strict guidelines about SMSFs loans. Here are some aspects to consider.
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When Can SMSFs Borrow?
SMSFs can only borrow in very limited circumstances. These include borrowing:
to meet benefit payments due to members or to meet an outstanding surcharge liability. The borrowings can’t be more than 10% of your fund’s total assets and are only for a maximum of 90 days.
to cover the settlement of security transactions so long as the borrowing is not more than 10% of your fund’s total assets. This is available for a maximum of 7 days. You can only borrow to settle security transactions if it was likely, when the transaction was entered into, that the borrowing would not be needed.
for improvements (e.g. adding an upper storey) but not repairs or maintenance (replacing the flooring after a flood).
to acquire a single asset, or identical assets (for example, adjoining shops) that have the same market value.
to buy shares.
to refinance where the new borrowing is solely to extinguish the previous loan.
How SMSF Loans Work?
The asset you would like to buy is not subject to any charges other than those provided in relation to the borrowing by the SMSF trustee.
Your asset can be replaced by another asset (that the SMSF is allowed to acquire) but only as listed in superannuation law.
Borrowing with your SMSF is a complex task and needs to be set up well from the beginning with expert advice. MDM Finance Solutions has in-depth knowledge and experience in securing lending arrangements that comply with all legal, taxation and compliance requirements of SMSFs.
The asset you acquire is held by the holding trust so that the SMSF trustee receives a beneficial interest in the asset. The trustee has the right to get legal ownership of the asset by making one or more payments after getting the beneficial interest. Investment returns earned from the asset also go to the SMSF trustee.
And if the loan defaults for some reason, the rest of your SMSF portfolio is safe, as the lender’s rights are limited to the asset held in the separate trust, including related charges such as rights to an income from the asset.