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SMSF Property Loans

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The amount a lender is willing to lend to financing your purchase factored in your ratio of debt to income, among other things.

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The amount a lender is willing to lend to financing your purchase factored in your ratio of debt to income, among other things.

Grow your retirement savings through SMSF property investment

Self-Managed Super Fund (SMSF) property loans allow you to use your superannuation to invest in real estate, combining the potential growth of property with the tax advantages of super. With careful planning and professional advice, an SMSF property can be a powerful component of your retirement strategy.

Unlike standard property investment, SMSF loans have unique rules and requirements designed to protect your retirement savings. The borrowing arrangement must be structured as a Limited Recourse Borrowing Arrangement (LRBA), which limits the lender's rights to only the property being purchased.

Our SMSF lending specialists can guide you through the complex process of establishing an SMSF property loan, ensuring compliance with all superannuation and tax laws while helping you achieve your retirement goals.

Secure Your Retirement with SMSF Property Investment

Key Features of SMSF Loans:
  • Limited Recourse: Protects other assets in your super fund if the loan defaults
  • Tax Efficiency: Rental income taxed at just 15% and potential CGT discounts
  • Commercial Property Option: Can purchase business premises for your own company
  • Retirement Focus: All investments must meet the sole purpose test of providing retirement benefits
  • Higher Deposits: Typically require 30-40% deposit from your SMSF
  • Strict Compliance: Requires proper documentation and annual SMSF audits

Is an SMSF property loan right for you?

SMSF property investment suits those who want more control over their super and are comfortable with higher risk and complexity. Ideal candidates typically have:

  • A super balance of $200,000 or more (for adequate diversification)
  • A long-term investment horizon (10+ years)
  • The capacity to make additional contributions if needed
  • Understanding of the risks and responsibilities
  • Access to professional SMSF advice

The SMSF Property Loan Process

Establishing an SMSF property loan involves several key steps:

  1. Set up an SMSF with corporate trustee (if you don't have one)
  2. Obtain independent financial advice
  3. Develop an investment strategy
  4. Arrange pre-approval for finance
  5. Establish the LRBA documentation
  6. Purchase the property in the name of the custodian trustee
  7. Manage the property in accordance with SMSF rules
What is an SMSF loan?+
An SMSF loan, also known as a limited recourse borrowing arrangement (LRBA), allows your self-managed super fund to borrow money to purchase an investment property. The loan is structured so that if the SMSF defaults, the lender's recourse is limited only to the property purchased with the loan, protecting other assets in the fund.
Why consider an SMSF property loan?+
SMSF property loans allow you to leverage your superannuation to invest in property, potentially providing: - Tax advantages (concessional tax rates on rental income and capital gains) - Portfolio diversification - Potential for capital growth within your super fund - Ability to purchase commercial property for your business - Greater control over your retirement investments
What types of properties can an SMSF purchase?+
Your SMSF can purchase: - Residential investment properties - Commercial properties (including your business premises) - Vacant land (with construction plans) Important restrictions: - The property cannot be lived in or rented by any fund member or related parties - The property cannot be purchased from a related party (except for certain business premises)
What are the borrowing requirements?+
Key requirements for SMSF loans: - Minimum super balance typically $200,000+ - Larger deposit required (usually 30-40%) - Stronger serviceability assessment - SMSF must have a corporate trustee structure - Loan must be non-recourse - Property must meet sole purpose test of providing retirement benefits
What are the costs involved?+
Additional costs to consider: - Higher interest rates than standard loans - Legal fees for LRBA documentation - SMSF setup costs (if new fund) - Annual SMSF audit fees - Property valuation fees - Lender's mortgage insurance (if applicable) - Ongoing property maintenance costs
What are the risks of SMSF property loans?+
Potential risks include: - Concentration risk (too much in one asset) - Limited diversification in your super - Reduced liquidity (property isn't easily sold) - Higher costs than traditional super - Potential for negative gearing within super - Changes to superannuation laws affecting benefits
How does the repayment process work?+
Repayment considerations: - Rent from the property must cover loan repayments - Contributions can be used to supplement repayments - No personal guarantees allowed - If repayments aren't met, the property may need to be sold - Any shortfall after sale cannot be recovered from other SMSF assets
What tax benefits are available?+
Potential tax advantages: - Rental income taxed at only 15% (accumulation phase) - Capital gains tax discount if held more than 12 months - Only 10% CGT if sold in pension phase - Tax deductions for expenses - No CGT if sold in retirement phase with zero balance Note: Tax laws change frequently - consult a specialist SMSF advisor