Using your SMSF to borrow for property and shares is now a permitted option. With SMSFs, you choose what to invest in, and that can include direct property. All the running expenses of the property are paid by the fund, meaning you’re not out of pocket in the same way you would be with a directly-owned investment property, and your fund can take advantage of significant tax benefits. This can open the door to profitable investment opportunities such as property and private commercial projects which were previously out of reach.
A self managed super fund can borrow funds to acquire assets, however the assets must not breach any other rules of the fund to hold assets, the asset must be held in a separate trust (often referred to as a bare trust, security trust or loan trust) at all times until the loan is repaid and the loan can not be secured by any other assets within the SMSF (non-recourse loan). In addition to this, once the loan is repaid or at anytime, the loan can not be increased against this asset to acquire other assets, the trust can only hold one asset at a time and the asset can not be substantially altered.
There are three main ways a SMSF can borrow money to invest in property:
- Direct loan from bank – In this arrangement, the Fund Trustee borrows from a bank to acquire an asset, using the superfunds cash reserves to pay any deposit.
- Direct loan from related party – under this arrangement the super fund can borrow the money from a related party including members and relatives. Other assets of the members, excluding superfund assets, may be used in this circumstance to fund the loan or part of the loan including a deposit.
- Combination of 1 and 2.
We have had proven success in this area and can provide the expertise required to make it happen.