SMSF Borrowing

Trying to get a hold of your finances and start controlling your investments and superannuation can be an intimidating process. Having a Self-Managed Super Fund (SMSF) can provide extra benefits for you as you are the trustee of the fund. During the process of setting up an SMSF you will be educating yourself and have a greater understanding of your SMSF and what you can do with it. Once you’re comfortable you may want to start expanding your knowledge and broadening the abilities of your fund by purchasing a property within your super.

Being an SMSF trustee you may be looking to gear your investment portfolio. It is important to get good financial advice at every stage of the process as a lot of self-managed super fund providers have ‘no borrowing’ rules.

These are rules regarding the purchase of a property and only compliance with these rules will allow you to acquire assets through your SMSF. These rules include aspects like: who is purchasing and living in the property, who is renting it and what is the sole purpose of the property.

You should be aware of fees and charges for SMSF properties and the sale of them. These fees can include: legal and other advice fees, any accrued stamp duty, bank fees and the upfront fees for the property. It is also important to consider ongoing property management fees too.

Gearing your super and borrowing into your property has strict conditions for all SMSFs. The group of conditions is called a: limited recourse borrowing arrangement. It involves appealing to a variety of eligibility criteria and can only be used to purchase a single asset. The risks with gearing a property with your SMSF are different to purchasing a property with a regular residential mortgage. Having liquidity and certain cash flow is always a necessity for the loan repayments and SMSF property loans tend to cost more than others. You must also consider that you cannot alter the property.

These risks can be mitigated with the right financial advice. Entering the world of self-managed super funds and gearing property within your super can be fraught with complications if you try to go it alone. Having a loan or financial adviser can help make the process simpler and smoother for all those involved. If you don’t have a Financial Planner or Accountant that can give you the advice we to set up your own Self Managed Super funds just let us know and we can point you into the right direction.