Self-Managed Super Fund Loans – TP Finance Solutions
What's it all about?
- You can now borrow in your super fund to buy property
- You can buy residential and commercial property
- You can transfer commercial property already owned into your super fund
- You cannot transfer residential property already owned into your super fund, even if it is an investment property
- These loans are different to normal loans because the documentation has to be very different and you should consult experts in this market before entering into a transaction
We can guide you through the legislative and tax implications of these transactions and provide you with all necessary documentation including the Warrant Trust Deed.
Our experience in this market is unmatched in Australia so if you have over $200,000 in super, take advantage of this today by calling to see how we can help you.
The Basics
Why borrow in your super fund to buy property?
- It can deliver up to 35% better after-tax returns over 20 years compared to traditional borrowing outside super
- It is an opportunity to diversify a super portfolio and therefore reduce the overall volatility and risk on the portfolio
- The ability to accumulate a higher level of funds in a super fund over and above legislated contributions limits through rental income from properties
- The potential to utilise traditional negative gearing strategies to generate tax-effective income
- It allows clients to defer any capital gains until retirement, at which stage they become tax free (subject to legislation)
- Asset protection from commercial and Bankruptcy Acts subject of course to anti avoidance rules
| What can you do | What you cannot do |
| Purchase business property through your SMSF which you can hold as an investment or occupy as an owner occupied business premises | Have owner occupied residential property in your super fund. |
| Sell/Transfer commercial property already owned to the super fund and release cash that you would otherwise not have been able to access. | Transfer residential property already owned by a related party into your SMSF. |
| Purchase residential property from an arms length vendor. | Redraw loan facilities in your super fund. |
| Purchase the property you would like to retire to, lease it out now and sell it to yourself when you retire and retire richer. |
The ability to transfer commercial property which the members of related entities already own, allows you to unlock cash to:
- Repay non-deductible debt
- Invest in your business
- Invest in other assets
- Re-contribute to your SMSF (subject to individual contributions limits)
Are SMSF loans any different to my home or other investment loans?
Yes – SMSF loans are different. This is because they are linked to superannuation legislation which normal loans are not subject to. There are also important tax implications if certain structures and processes are not adhered to.
Superannuation legislation dictates certain characteristics that these loans must have and therefore the documentation for them is very different to normal loans.
This is why it is important to have experts in this field helping you find the right solutions for your particular situation.
That’s where we come in!!
We have been working in this area for the past three years – even before the legislation changed - and are therefore the most experienced team in the country when it comes to finding the right SMSF loan solution for you.
We are very particular about which products we use and we assess them in reference to both the Superannuation Act and the Tax Act.
Some lenders have loan structures that we do not believe are fully compliant and therefore they are on our hold list until we are satisfied by the ATO that they are ok or the lenders change their structures.
How are SMSF Loans different?
Generally the characteristics of the loans we use are as follows:
- The lenders right of recourse is limited to the property itself and no other assets of either the super fund or the members
- There are no personal guarantees required – whilst some lenders have these in their structures we will not use them due to what we believe are negative tax consequences
- You can borrow up to 70% of the value of a property
- Loans are generally from $200,000
- Clients do not generally have to provide their personal and business financials. We obtain financials from the super fund or existing super balances that are to be transferred across to a Self Managed Super Fund
Structure of SMSF Loans - How it Works
- You need a Self-Managed Super Fund (SMSF) to undertake this transaction. The trustee of the SMSF is the borrower.
- The property must be held in a trust which is generally called a warrant trust. This trust may also be referred to as the purchasing trust, special trust or bare trust. All of these terms just mean that this is the vehicle which holds the property on trust for your SMSF.
- The trustee of the warrant trust is the entity which is the purchaser on the sale contract that you enter into.
- The trustee of this trust must be different to the trustee of your SMSF. SMSF Finance Specialists can provide you with SMSF and Warrant Trust Deeds and Corporate Entities.
- The beneficiary of the warrant trust is your SMSF.
- Subject to the wording of the trust deed which governs your warrant trust, you may be able to have more than one super fund as beneficiary of this trust.
- The Mortgage is given to the lender by the trustee of the warrant trust to secure your SMSF loan.
Book in for a free consultation, at a time that suits you.
If you have any questions or would like to arrange a free consultation with one of our experienced advisors, call us on (02) 8224 8000 or click here to contact us online.
