FAQs

A self-managed super fund is a private superannuation fund that allows you to manage your own superannuation investments for your retirement. Not everyone can set up their own super, so understanding the basics is crucial before getting started. We always suggest you speak to your accountant or financial advisor for any questions on setting up your SMSF.

Yes, SMSFs can borrow money to invest in property, managed funds or shares provided they use a Limited Recourse Borrowing Arrangement (LRBA). Lending to SMSFs is heavily regulated and operates under a stringent set of rules. It’s essential to seek expert guidance from professionals — get in touch with us to learn more.

SMSF loans generally allow up to 80% leverage and 30-year terms, with up to five years of interest-only repayments. The minimum loan amount is $100,000, subject to lender approval of the property and borrowing capacity of the fund.

A limited recourse SMSF borrowing arrangement requires an SMSF trustee to take out a loan from a third-party lender as well as from related party. The trustee then uses the loaned funds to purchase a single asset (or collection of identical assets that have the same market value) to be held in a separate trust.

Any investment returns earned from the asset go to the SMSF. If the loan defaults, the lender’s rights are limited to the asset held in the separate trust.

A trustee of an SMSF 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. 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, a separate bare trust is required for each property.

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

The legislation does not prohibit on who can lend to the SMSF, so it is really up to the trustees to decide how to finance the purchase of the property or the other assets in the SMSF.

Some lenders require that not all of the liquid asset (cash or shares) in the SMSF be used to purchase a property and impose a minimum requirement. For example, they may require the SMSF can still show 10% of the property value in either shares or cash after the settlement of the property. Learn everything you need to know about liquidity requirements.

The Rent from the Property Investment must be banked into the SMSF Bank Account.

The Expenses for the Property Investment must be paid from the SMSF Bank Account.

No. A SMSF cannot transfer (or sell) an asset owned by a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) to the SMSF unless the transfer is specifically allowed by legislation. Residential Property is not specifically allowed to be transferred by legislation.

Yes. Business Real Property (ie property that is used wholly and exclusively in one or more businesses such as Commercial Property) is specifically allowed to be transferred from a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) to a SMSF at market value. However you will need to consider Capital Gains Tax and Stamp Duty Implications prior to making this transfer.

No. It is expressly forbidden for a SMSF to invest in the Family Home of a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) irrespective of whether commercial rental is paid.

No. It is expressly forbidden for a SMSF to invest in a Holiday Home used periodically by a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) irrespective of whether commercial rental is paid.

Residential Property acquired by a SMSF must be rented out to third parties unrelated to you. This means you cannot rent a property to family including parents, siblings, children or your spouse. You can however rent the property out to unrelated friends. Commercial Property acquired by a SMSF (i.e. Property that is used wholly and exclusively in one or more businesses) can be rented out to any party including to you or an entity associated to you to the extent that commercial rental is paid.

No. At this time clients can only borrow to purchase Property that has already been constructed, trustees cannot borrow to purchase Vacant Land.

No. At this stage clients can only borrow to purchase property that has already been constructed, trustees cannot borrow to subdivide Property.

We’ll do our best to make the procedure as simple as possible, but you can assist us by having copies of

• SMSF Trust Deed
• Custodian Trust Deed
• SMSF audited financial statements
• SMSF bank statement
• Rental Estimates

We’ll go through everything else you need to know before applying, such as the loan amount, interest rate, fees and charges, and terms and conditions.