Considering Purchasing A Property With Your SMSF ?
Not sure which lender is right for you
Would like help putting your application together
Need advise on the structure and regulations of an SMSF loan ?
Our Experienced SMSF Loan Brokers Can Help
Purchasing a property with your self managed super fund ( SMSF ) can be a complex process. Lenders offer a wide range of significantly different lending options for SMSF loans and there are strict ATO regulations on borrowing money to purchase a property with your super. A SMSF loan set up incorrectly could cause you major issues .The team at Assured Lending have Mortgage Brokers with many years experience who specialise in SMSF loans. Our Brokers will give you the knowledge and support to make informed choices and get the right SMSF loan, fast and stress free. All advice & services provided by Assured Lending are completely cost and obligation free.
Watch the ATO video below to see why you need the right advise on your SMFS loan
- All costs & expenses are paid by the super fund so you are not required to save for a deposit or use funds from your everyday finances.
- Capital gains tax won’t be paid if your SMSF purchases an investment property and sells it when fund members are in ‘pension phase’. This could potentially save hundreds of thousands of dollars in tax.
- If the property is owned for more than 12 months, but sold before fund members are in pension phase, capital gains tax is capped at 10% which is much lower than a regular investment property.
- The maximum tax payable on an SMSF property rental income is 15% which is much lower than an average Australian’s tax income rate.
- All expenses for the property including rates, maintenance, insurance etc can be claimed as tax deductions by the SMSF.
- Negative gearing can be used to reduce the tax paid as loan interest repayments can be offset against other taxable income earned by the SMSF.
- SMSF loans are non-recourse loans, meaning that if you default on your loan, the bank cannot come after any other assets owned by your super fund.
- A commercial property that is going to be used for business purposes can be purchased from a person who is related to the SMSF members and any business that is owned by the SMSF members can occupy the property as a commercial tenant.
- SMSF loans are generally more restrictive than a normal home loan.
- SMSF loans will usually require a higher deposit amount.
- SMSF loans usually do not allow you to redraw funds.
- Interest rates for SMSF loans are usually higher than normal home loan rates.
- Property choice is limited to established properties only.
- The trustees of the SMSF are not permitted to live in the property until after retirement when the property title can be transferred from the SMSF into their own names. Prior to this, the property must be used as an investment only.
- A residential property cannot be purchased from a person who is related in any way to the fund members.
A self managed super fund or SMSF is a superannuation fund that your super contributions are paid directly into, you become the trustee for the fund and run the fund yourself, instead of using an industry superannuation fund. As the trustee, you choose how your superannuation is invested, giving you much greater control over your financial future and eliminating the costs paid to an industry super fund.
If you have not yet set up a SMSF, your accountant or financial advisor will be able to assist you. If you don’t have an accountant or financial adviser, the team at Assured Lending can recommend some of the professionals we work with, who specialise in setting up Self Managed Super Funds. For general advice on SMSF’s, visit the ATO Self Managed Super Fund Webpage.
A self managed super fund loan or SMSF property loan enables the fund to borrow money for the purchase of income producing property. Recent changes to the laws & regulations around SMSF loans have made buying property with super a more popular decision for many Australians. A self managed super fund can only loan money to purchase a property if the strategy is clearly outlined in both the SMSF trust deed and investment strategy statement. The property purchase has to be for the sole purpose of following the SMSFs investment strategy and creating wealth for retirement.
All payments for the deposit, legal costs and stamp duty are made from your super fund. Once the property has been purchased, all costs associated with the property, including your loan repayments, are paid from the super fund and all income generated from the rental of the property are paid into the super fund. You as the Trustee for the fund have full control over all leasing, renovating and selling decisions.
There are many different SMSF loan options from Australia’s leading lenders currently available on the market. Each loan has varying points of difference relating to cost, terms & conditions and structural requirements. To protect your future income, you need to have knowledge regarding the best loan options for your needs. Speak to a Mortgage Broker who specialises in SMSF loans to ensure you have the expert advice you need to make an informed decision.
- Choice of repayment types – principal and interest, or interest only
- Flexible terms from 1 to 30 years
- Principal & interest or interest only repayments
- Choice of interest rates – variable, fixed or a combination of both
- Varying deposit requirements – starting from as low as 20% of the purchase price.
A major factor in the success of any loan application is knowing the criteria and flexibilty of the lenders. Australian lenders have extremely strict requirements for SMSF loans and they offer a wide range of significantly different lending options. Because of the large amount of Self Managed Super Fund investment loans that we do, we know which lenders will be more favourable to your specific needs and we can structure a loan application for the highest chance of approval with the best outcome for your financial future.
- Deposit: You will need to pay a deposit from your SMSF of least 20% of the property value. This percentage varies with different lenders.
- Rental income: Projected rental income from the property is factored into your ability to make repayments.
- Superannuation contributions: Lenders check how regularly and consistently all members of the SMSF make super contributions as these will be relied on, in conjunction with rental income, to meet your loan repayments.
- Structure of SMSF: The way your SMSF is structured must be compliant with ATO and ASIC rules.
“Quintin from Assured Lending was pivotal in making the complexity of an SMSF investment property purchase easier to understand and settle. From the vendor, to the sales agent, the solicitor, my accountant and the underwriter – Quintin was the guiding principle through the whole process. This is my second property through Quintin and I have no hesitation in recommending him to other buyers. Quintin exceeds all expectations.” Peter Dymond
When investing in property with a SMSF, you must comply with these rules.
- Must meet the ‘sole purpose test’ of solely providing retirement benefits to fund members
- Cannot be purchased from a relative of any of the fund members
- Cannot be lived in by any of the fund members or any fund members’ relatives
- Cannot be rented by any of the fund members or any fund members’ relatives
For Commercial properties only, your SMSF is allowed to purchase a business premises, that your company leases and you would pay rent directly to your SMSF at the market rate.
Set up a self managed super fund and speak to your accountant or financial adviser regarding the rules around SMSF lending and the structure of your super fund to ensure this is a viable strategy for you.
Appoint a property trustee to purchase the property on behalf of your SMSF. Your accountant or financial planner will assist you with this.
Speak to a Mortgage Broker who specialises in SMSF lending to assist you with choosing the right lender for your needs. The Mortgage Broker will ensure you are aware of the property requirements under a SMSF loan and the different lenders rates, terms & conditions. They will also advise you on your maximum borrowing capacity.
Select an investment property to purchase which meets the lenders criteria.
Your mortgage Broker will put together your application for a SMSF loan and liaise with the lender on your behalf.
Once your loan is approved, the property trustee pays the deposit, legal costs, loan fees and stamp duty from your super fund and exchanges contracts.
At settlement the property trustee mortgages the property to your lender who pays the balance of the purchase.
Once the property is leased, your SMSF receives rental income, pays all costs associated with the property and makes the loan repayments. The property is managed in the same way as any other real estate investment.
The property is held in trust for the SMSF by the property trustee and once the loan is repaid, the legal title may be transferred from the property trustee to the SMSF, or the property may be sold.