Are you looking to boost your superannuation by venturing into property investments but lack sufficient savings within your super? If you have a self-managed super fund (SMSF), exploring the option of borrowing money to invest in property might be a viable solution. SMSF property loans offer numerous benefits, primarily tax incentives, and the opportunity to leverage rental income as additional cash flow, enhancing your investment prospects.
iCare Super is here to assist you with your SMSF borrowing needs, unlocking a new realm of investment opportunities. Connect with one of our specialists in self-managed super fund loans today.
An SMSF can secure funds from various sources to acquire properties or other assets:
Legislation does not impose restrictions on who can lend to the SMSF, leaving it to the trustees to determine how to finance property or other asset purchases within the SMSF.
SMSF trustees must ensure that the borrowing structure adheres to the Superannuation Industry (Supervision) Act (SISA) and other tax rules:
It’s crucial to be aware of the Australian Taxation Office’s (ATO) concerns regarding SMSF borrowing:
A limited recourse SMSF borrowing arrangement involves the SMSF trustee taking out a loan from a lender. The loaned funds are then used to purchase a single asset or a collection of identical assets held in a separate trust.
A trustee of an SMSF or its investment manager must ensure that all investments are conducted on an arm’s length basis or, if the parties are not at arm’s length, that the terms of the investment are no more favourable to the other party than they would be if the parties were dealing at arm’s length.
Yes, but proper documentation and an arm’s length rate of interest is required for this type of self managed super fund borrowing.
Yes. The super law (specifically, subparagraph 67A(1)(a)(i) of the SISA) applying to these arrangements explicitly provides that, under a limited recourse borrowing arrangement, the SMSF trustee can apply borrowed money towards expenses incurred in connection with the borrowing.
Yes. The recourse of the lender against the SMSF trustees in the event of a default on the SMSF borrowing must be limited to the asset that is being acquired under the arrangement. A third party may put up their own assets as a guarantee to provide additional security to the lender for SMSF property loans.
Multiple real property titles cannot generally be acquired under a single limited recourse borrowing arrangement. You only can buy one property in one bare trust. However, the bare trustee trustee can be the same for multiple bare trusts. If you set up a corporate trustee for the the bare trust, this company can be used as the trustee for multiple bare trusts for your SMSF.
No. An existing SMSF asset cannot be put into a limited recourse borrowing arrangement. The giving of a charge over an existing asset of the fund (the vacant land), as would generally occur under such arrangements, would contravene the super law.
If you’d like to find out more about self managed super fund borrowing or you want to weigh up your options when it comes to self managed super fund loans, make an appointment with iCare Super today. Call us on (03) 9557 4079 or contact us online.