Refinance an SMSF loan
You can refinance your SMSF loans regardless you have borrowed from banks, financial institutions or related parties.
Before refinancing your SMSF loans, it is very important you check the following:
- has the interest rate been fixed based for the current loan?
- will any penalty apply to your SMSF loan if you breach the fixed interest term?
- does the independent valuation meet the LVR requirement?
Please note you can not cash out the equity of the property when you refinance your SMSF loans.
SMSF trustees need to comply with the safe harbour guidelines required by ATO. Please refer point 7 in this link:
You can refinance your SMSF for cheaper interest rate. However, you are not able to use any interest rate you want if you refinance from banks to a related party. The interest required by ATO:
Self-managed super fund limited recourse borrowing arrangements interest rates
The following conditions must be met when you refinance between related parties or from a bank to a related party:
- use the interest rate published by ATO
- if the interest rate is fixed, the period can not be more than 5 years
- maximum term of the loan is 15 years
- maximum LVR is 70%
- a registered mortgage is compulsory
- payment of principle and interest must be on time
- a formal LBRA much be signed, dated
Failure to comply with the above requirements, the refinanced loan may be not on arm’s length terms. Trustees may need to provide evidence to prove the loan is a commercial loan based on the same circumstance to avoid breaching superannuation acts and legislation.