SMSF Loans

Starting from July 2013 SuperEasy®'s has added to its product offering mortgage and finance broking service, specialising in SMSF Limited Recourse Borrowing Arrangements. We will help you choose a loan which is suitable to your needs and provide you with the comprehensive information on a broad range of financiers and products. Once you have chosen a suitable loan from our panel of lenders, SuperEasy®'s will assist with all the aspects of obtaining the loan approval. We understand the speed and delivery are the most crucial part of the loan process, this is why we make sure that our turnaround times are measured in hours, not weeks like other service providers. SuperEasy® deals with specialist LRBA lenders and by having direct contact with the loan assessment and decision making team (not call centers) we always know the very latest status of the files, making sure your settlement deadline is met.

SMSF and Limited Recourse Borrowing Arrangements (LRBA) Since the ATO final ruling, issued in May 2012, relating to “Self-Managed Superannuation Funds: Limited Recourse Borrowing Arrangements” the topic has become a point of considerable interest among SMSF Trustees wishing to diversify their investments. The final ruling presents an opportunity for SMSFs to invest in direct properties utilising the borrowing arrangement but it also comes with the critical issue of insuring all the SMSF compliance requirements are met.

Branching out into mortgage broking and SMSF LRBAs, is a natural progression for SuperEasy®'s business, given the SMSF expertise gained over 13 years in servicing SMSFs in the capacity of SMSF accountants, auditors and tax agents. The combination of SMSF compliance and accounting expertise with the mortgage broking and loan expertise provides unique and unmatched new service in the market with obvious and substantial advantages.

How a complying SMSF loan works Case study scenario: SMSF wants to buy a property (residential or commercial real estate) but does not have enough funds for the full purchase. The SMSF can now make an equity contribution on the property and borrow the remainder of the funds to complete the purchase. The following diagram illustrates the process:

SMSF LRBASMSF Borrowing Diagram


SMSF Financial position: The SMSF has two members and is in the accumulation mode. The fund holds $250,000 in cash and $150,000 in other assets. Being in the accumulation mode fund receives various types of superannuation contributions for its two members. The fund has also investments in equities from which it receives dividends. After talking to their financial and legal advisor and reviewing the investment strategy, the trustees decide to diversify their portfolio by buying an investment residential property for $600,000. The advisor explained to the trustees that they can borrow, depending on the lender, up to 75% of the property value and up to 50% of the land value. This means that the SMSF would need to pay up to $150,000 deposit and obtain a loan for $450,000 representing 75% of the property value, using a limited recourse borrowing arrangements. The remaining funds to complete the purchase, transaction costs (stamp duty etc.) are paid from the fund’s reserves at settlement. The advisor also explained that because the loan is a limited recourse loan in the event of a default, the lender has recourse to the property security and any additional security provided by guarantors. All other assets in the fund will be protected from the lender. After the purchase and settlement, the trustees arrange for the property to be leased to an unrelated party and the rent, together with other SMSF income and/or member contributions are used to make loan repayments to the lender. Once the loan is paid off, the legal ownership of the property can be transferred to the SMSF.

SMSF Loans Features and Benefits

  • Investment in property must be consistent with the SMSF Investment Strategy and Statement of Advice
  • The fund’s Trust Deed must allow borrowing
  • The SMSF must purchase residential property from an unrelated party at the arms-length
  • If the property is a commercial property, then the SMSF can purchase the property from a related or non-related party, at market value and at arms-length
  • The SMSF loan is limited recourse which means that in the event of a loan default the lender only has recourse to the security property and any additional security provided by the guarantors but cannot claim any other SMSF assets
  • The security property is held in bare trust for the SMSF. The bare trust trustee must not be the trustee of the SMSF
  • The titleholder (legal owner) of the security property is the bare trust and the beneficial owner of the real estate will be the SMSF
  • SMSF makes the loan repayments. After the loan is repaid the legal ownership of the property is transferred to the SMSF
  • Generally acceptable security includes metro real estate in most capital cities, including residential, and non-specialised commercial property. The property size must be a minimum of 50 square meters!
  • SMSFs can deal with the property in the same way investors can deal with "normal" investment properties (i.e. they can lease, renovate, repair, or sell the property, subject to the terms of the relevant loan and mortgage) but they are not allowed to improve the property
  • All rents are paid directly to the SMSF. Loan repayments are made in the ordinary way from the SMSF
  • The SMSF can pay out or reduce the mortgage at any time (subject to the terms of the relevant loan)
  • The SMSF receives all income and capital growth even if the property has not been paid off. The SMSF can use any income including income from the property to help pay off the loan
  • Interest expense may be claimed as tax deductions by the SMSF and potentially reduce the SMSF's tax liability

QuestionsQuestions? Call us on 1300 554 333 or send us an e-mail to info@supereasy.com.au.

Please click here to start your “Free Preliminary SMSF Loan Assessment Application”:

    Preliminary SMSF Loan Assesment Form

Alternatively, you can download the form by clicking on "Free Preliminary SMSF Loan Assessment Application", or you can request the form by sending us an email to admin@supereasy.com.au

What happens next:

  • Upon the receipt of your “Free Preliminary SMSF Loan Assessment Form" you will be advised whether your fund is viable for the borrowing scheme
  • You will receive the Credit Guide and if we are able to allocate a suitable lender for your requirement lender’s terms and conditions, including lender's fees
  • If you are successful with the first step you will be asked to supply additional information to enable us to process the assessment. You will also receive our Credit Quote and Proposal
  • If you are unsuccessful with the first step we will contact you and explain your options (if any) to satisfy the lending criteria

Current Rates and Fees applying to the SMSF Investment Property Loans

SuperEasy®'s utilises the best loan providers in the market and current interest rates are from 5.79% (5.99% *comparison rate) for variable rate investment residential with up to 80% LVR (Loan to Value Ratio), and with up to 75% LVR for commercial loans. Please note the minimum loan amount $100K for residential loans. Click here to find more about SMSF Commercial Loans.

*Comparison rates are based on a secured $150,000 loan over a 25-year term. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The rates and comparison rates displayed reference residential SMSF loans only, other rates apply to commercial SMSF loans.

Upon your acceptance of our Credit Quote and Proposal for your investment property you will receive an invoice for $250 (GST incl.). This commitment fee includes initial interview with the borrower making sure that the loan is suitable, collection and verification of all the documentation relevant for the procurement of the loan and liaising with the lenders until all the documentation is successfully processed and the loan is approved. Various additional costs apply associated with the loan procurement, such as lenders’s fees starting with the application fee, legal fees, valuation fees, settlement and stamp duty fees. All the fees are summarizes in our Credit Quote and Proposal. Current rates should be used as a guide only and can change without notice.

Interest rates and application fees relating to the SMSF property loans are higher than for the regular mortgages, and here are the main reasons:

  • complexity of the SMSF compliance and legislation resulting in the involvement of specialized resources
  • increased amount of the supporting documentation
  • longer due diligence process
  • higher risk of the lenders associated with the Limited Recourse Borrowing Arrangements concept

SMSF Loan Process

1. Get Professional Advice
Obtain professional advice from an Australian Financial Services Licence (AFSL) holder if considering whether to establish your SMSF and or borrowing through your SMSF is an appropriate investment strategy for your SMSF.

2. Establish your SMSF
The SMSF Trust Deed must have the clause giving the Superannuation Fund Trustee power to:

  • purchase real estate,
  • borrow money, and
  • mortgage property to secure repayment of that borrowing.

The proposed investment must comply with the requirements of the Superannuation Industry Supervision Act 1993 (SIS Act) and ensure that the investment in real property is in line with the SMSF's overall investment strategy, and the proposed purchase complies with all other requirements of the SIS Act (including but not limited to the "in-house asset rules" and the restrictions on acquiring assets from "related parties"). It is important at this stage to verify the available equity in your SMSF as this will effect the ultimate purchase price of the property your fund can acquire. Submit the Trust Deed to the State Revenue Office for a payment of stamp duty if applicable.

3. Obtain Loan Pre-approval Obtain lenders’s pre-approval prior to signing the real estate purchase contract and paying deposit monies. There is no point in establishing a Custodian Property Trust before the loan pre-approval is granted.

4. Establish the Custodian Property Trust
After the lenders’s pre-approval is obtained you can setup the Custodian Property Trust Structure. N.B. The Custodian Property Trust is also called Holding or Bare Trust. The Custodian Property Trust Deed sets out the relationship between the custodian who acquires the property as trustee for the superannuation fund and gives a mortgage over the property to the lender, and the trustee(s) for the superannuation fund who will borrow under the loan agreement to fund the purchase of the property by the custodian. The Custodian Property Trust must have a company as a trustee. That company cannot be the same company as the company that acts as trustee for the SMSF. Directors of the Custodian Property Trust Company must be the trustees of the SMSF if the fund has individual trustees, or directors of the trustee company of the SMSF.

5. Signing of the Custodian Property Trust
Depending on a lender, signing of the Custodian Property Trust Deed must be done before exchange of contracts for some lenders and after the exchange of contracts for other lenders.

6. Purchase Contract can be formalised
When contracts are exchanged, subject to finance, between the seller as vendor and the Custodian Property Trust as purchaser, the deposit will be paid by the SMSF. The purchase contract must be signed in the name of the Custodian Property Trustee and not in the name of the SMSF or trustees/members.

7. Stamping of the Custodian Property Trust
Submit the Custodian Property Trust Deed to the State Revenue Office for a payment of stamp duty if applicable:

  • Australian Capital Territory – $200
  • New South Wales – $50
  • Northern Territory – $20
  • Queensland – $0
  • South Australia – $0
  • Tasmania – $20
  • Victoria – $0
  • Western Australia – $0

8. Valuation Ordered and Formal Loan Approval
Once you have signed the purchase contract and returned the documentation to us, the lender will order the valuation. Once all the lender’s conditions are satisfied, formal approval for your SMSF loan will be issued.

9. Lenders Solicitors prepare and issue Mortgage Documents
The lender will instruct solicitors to prepare your mortgage documents and they will be presented to you for signing. The SMSF borrowing structure uses normal loan and mortgage documents with special provisions to provide the limited recourse against the property being purchased.

10. Settlement
The purchase is completed after registration of the transfer on the mortgage to the Trustee of Custodian Property Trust. This will be arranged by your solicitor.

11. Investment Property Income and Expenses
The property rent is paid directly into the fund’s SMSF bank account as well as loan repayments and other property expenses.

12. Loan Serviceability and Loan Protection Insurance
Self Managed Superannuation Fund Trustees have the responsibility of considering and incorporating the life insurance for the members in the fund’s Investment strategy. The legislation however does not stipulate the level of the insurance coverage for the SMSF members, given the possibility of the members having an appropriate life insurance level outside the SMSF. SMSFs LRBA also require review and implementation of the insurance strategy. The need for the insurance arises from the ever changing life events that can impact the loan repayments. The life events dictating such a need are anything from loss of employment, serious injury, illness or death. An appropriate insurance strategy will ensure the loan repayments are met. Note: the insurance policy must be in the name of SMSF with a member/members named as the insured person/s.

13. Loan Repaid
When the investment property loan is eventually repaid, trustee of the Custodian Property Trust has to transfer the asset from the Custodian Property Trust to the SMSF.

The Advantages of having a Mortgage Broker
Buying a property is a complex and potentially stressful experience. Appointing a competent mortgage broker will ensure the proper ground work has been done, and the selection of the best lender and the most suitable deal is in place.

Limited Recourse Borrowing Arrangements available to SMSFs are complex due to the specific requirements, legislative issues and lender limitations imposed on this type of loans. SuperEasy®'s expertise in the field of SMSF establishment compliance documentation and structure, accounting, taxation, audit and regulatory reporting, presents itself as a comprehensive advantage for also providing SMSF mortgage broking services.

With the solid understanding of the legal and compliance documentation associated with the SMSF loans and the knowledge of the lending markets, SuperEasy®'s provides the quickest and most cost efficient loan solutions.

The process starts with the applicants filling out the Preliminary Assessment Form which will determine whether the loan application will be successful, minimizing unnecessary costs for the client. The turnaround for the pre assessment of the loan application is usually not more than couple of hours. The applicant will then receive the information about the variety of deals, interest rates and different lenders.

Being independent and not affiliated with any lender we recommend lenders from the whole of the market, making sure the most suitable loan is tailored for the customer.

We will also guide you through a lender application form and once completed submit it to the lender for approval. Following documents credit checks, the lender will organise the valuation of the property, producing an independent valuation report of the property you are hoping to buy. The aim of the valuation report is providing security to the lender in case the mortgage repayments are not met and the property needs to be sold.

We recommend that you have an initial consultation with us before you start looking for a property to get a rough idea of how much you will be able to borrow, whether the investment property address postcode is acceptable to the lenders, and more importantly, whether your SMSF structure and current Trust Deed allows LRBA.

The critical factors deciding how much money your SMSF can borrow and whether you are going to be able to service/repay the loan are:

  • SMSF current assets value,
  • Annual guaranteed superannuation contributions into the SMSF (your employer’s contributions), and
  • The investment property rent.

The lenders will provide loans of up to 80% of the investment property value and give you an option of selecting a type of interest rate, whether it is fixed or variable. SuperEasy®'s provides mortgage broking services on the assumption that you have obtained advice of a licenced financial planner in relation to the investing of your SMSF funds in real estate property.

LRBA Background
Generally, subject to limited exceptions allowed under the Superannuation Industry (Supervision) Act 1993 (SISA) Self-Managed Superannuation Funds (SMSFs) are prohibited from borrowing money. In September 2007 SISA was changed to allow SMSFs to invest in certain limited recourse borrowing arrangements via borrowing money to acquire a permitted asset. At the time the ATO was concerned about the scheme because of emerging higher risk and superannuation planning issues, subsequently in July 2010 the laws have been amended to clarify and better specify the limited recourse borrowing arrangements by SMSFs. The amendment has outlined the following requirements:

  • Super fund assets are better protected in the event of a default on a borrowing
  • The asset within the arrangement can only be replaced by a different asset in very limited circumstances specified by the law
  • The borrowed monies are used to acquire a single asset, or a collection of identical assets, having the same market value (that are together treated as a single asset), which the fund is not otherwise prohibited from acquiring (called the 'acquirable asset'). The new law makes it explicit that borrowed money applied to expenses incurred in connection with the borrowing or acquisition (such as loan establishment costs or stamp duty), or expenses incurred in maintaining or repairing the acquirable asset, is allowed
  • The borrowed monies are not applied to improving an acquirable asset
  • The acquirable asset is held on trust (the holding trust) so that the SMSF trustee receives a beneficial interest in the asset
  • The SMSF trustee has the right to acquire legal ownership of the acquirable asset by making one or more payments after acquiring the beneficial interest
  • Any recourse that the lender or any other person has under the arrangement against the SMSF trustee is limited to rights relating to the acquirable asset. This limitation applies to rights directly or indirectly relating to a default on the borrowing and related charges or directly or indirectly relating to the SMSF trustee's rights in respect of the acquirable asset (for example, rights to income from the asset)
  • The acquirable asset is not subject to a charge other than as provided in relation to the borrowing by the SMSF trustee

In May 2012 the ATO released final ruling “Self Managed Superannuation Funds: limited recourse borrowing arrangements – application of key concepts”. The final ruling provides greater investment opportunities because it allows investments in an older investment property that is in a need of renovation, and the renovation of the property can be done by using borrowed money under the existing LRBA. However, there is a caution in the ruling against the property improvements that cannot be performed by using borrowed money under the existing LRBA. The ruling provides vital definitions and key concepts explained by examples and it’s the must read for trustees thinking about LRBA.

Disclaimer: Information on this page is provided as a general information only and does not constitute a specific recommendation. You need to seek professional advice from an AFSL holder before considering whether borrowing through your SMSF is an appropriate investment strategy for your SMSF.


Privacy Policy
This privacy policy refers to SuperEasy Pty Ltd, ABN 48 092 141 083, Authorised Credit Representative 442116 and its related businesses.
We want you to be confident that the personal information you provide to us is treated with the highest degree of integrity and privacy. However, it is equally important to us that we provide the best possible service across our wide range of products and services. To achieve this aim we need to make the most efficient use of your personal information.
We recognise that any personal information we collect about you will only be used for the purposes we have collected it or as allowed under the law. It is important to us that you are confident that any personal information we hold about you will be treated in a way which ensures protection of your personal information.
In handling your personal information, we are committed to complying with the Privacy Act and Australian Privacy Principles.

What is “personal information”
Personal information is any information or opinion about you in which you are identified, or in which your identity can reasonably be ascertained from the information or opinion. It does not matter whether the information or opinion is true or not, or whether it is recorded in a material form or not. The personal information we hold about you may include credit information.
Credit information is information which is used to assess your eligibility to be provided with finance and may include any finance that you have outstanding, your repayment history in respect of those loans, and any defaults. Usually, credit information is exchanged between credit and finance providers and credit reporting bodies.
The kinds of personal information we may collect about you include your name, date of birth, address, account details, occupation, and any other information we made need to identify you. If you are applying for finance we may also collect the ages and number of your dependants and cohabitants, the length of time at your current address, your employment details and proof of earnings, expenses and other financial information. If you apply for any insurance product through us we may also collect your health information. We will only collect health information from you with your consent.

Collection of information
We collect personal information for the purposes of assessing your application for finance and managing that finance. We may also collect your personal information for the purposes of direct marketing and managing our relationship with you. From time to time we may offer you other products and services. Collecting your personal information also allows us to identify and protect your personal information, including account information and services, from unauthorised access. We will only collect such personal information if it is necessary to provide our products and services. Where possible we collect your personal information directly from you. You provide this information to us when request products and services or make an enquiry. We may also collect your personal information from credit reporting bodies, finance brokers and other people such as accountants and lawyers. In most cases we will request your consent to any collection and take reasonable steps to ensure that you are made aware of who we are, the purpose of the collection, how you can access your information and who we may disclose your information to. It will typically be necessary for us to identify you in order to successfully do business with you. However, where it is lawful and practicable to do so, we will offer you the opportunity of doing business with us without providing us with personal information. For example, if you make general inquiries about interest rates or current promotional offers.

Use and disclosure of personal information
We may use or disclose personal information for the primary purpose for which it was collected. We may also use the information for a related purpose and where it would reasonably be expected by you that we use the information in such a way. This information is only disclosed to third parties in the circumstances covered in this policy or as otherwise notified to you at the time of collection of the information. We may need to disclose aspects of your personal information to:

  • to prospective funders or other intermediaries in relation to your finance requirements;
  • to other organisations that are involved in managing or administering your finance such as third party suppliers, printing and postal services, call centres;
  • to associated businesses that may want to market products to you;
  • to companies that provide information and infrastructure systems to us;
  • to anybody who represents you, such as finance brokers, lawyers and accountants;
  • to anyone, where you have provided us consent;
  • where we are required to do so by law, such as under the Anti-Money or Laundering and Courter Terrorism Financing Act 2006 (Cth);
  • to investors, agents or advisers, or any entity that has an interest in our business; or
  • to your employer, referees or identity verification services.

Prior to disclosing any of your personal information to another person or organisation, we will take all reasonable steps to satisfy ourselves that:
1. the person or organisation has a commitment to protecting your personal information at least equal to our commitment; or
2. you have consented to us making the disclosure.

We may use cloud storage to store the personal information we hold about you. The cloud storage and the IT servers are located in Australia.

Direct marketing
From time to time we may use your personal information to provide you with current information about finance, offers you may find of interest, changes to our organisation, or new products or services being offered by us or any company with whom we are associated. If you do not wish to receive marketing information, you may at any time decline to receive such information by telephoning us on 1300 554 333. If the direct marketing is by email you may also use the unsubscribe function. We will not charge you for giving effect to your request and will take all reasonable steps to meet your request at the earliest possible opportunity.

Ensuring your personal information is up-to-date
We rely on the personal information we hold about you to efficiently conduct our business of providing or arranging products and services. For this reason, it is very important that the personal information we collect from you is accurate, complete and up-to-date. During the course of our relationship with you we may ask you to tell us of any changes to your personal information. We also invite you to contact us at any time to update or correct your personal information.

Security and storage
We will take reasonable steps to protect your personal information by storing it in a secure environment. We may store your personal information in paper and electronic form. We will also take reasonable steps to protect any personal information from misuse, loss and unauthorised access, modification or disclosure.

Access and correction to your personal information
You may request access to any of the personal information we hold about you. In most cases, details of the personal information we hold about you is available by contacting us. If the information you seek is not readily available, for example, archived data, then we will endeavour to provide this to you within 30 days of your request. We reserve the right to charge you a fee for this retrieval. We may be required by law or by good business practice to retain your personal information for a period of time after you have ceased your relationship with us. After the required time has passed we attend to the secure destruction or deletion of your personal information. We are not always required to provide you with access to your personal information upon your request. We may refuse you access to personal information in a number of circumstances, such as where the information may relate to existing or anticipated legal proceedings with you, where denying access is required or authorised by law, or where the request for access is regarded as frivolous or vexatious. If we deny your request for access to, or refuse your request to correct your personal information, we will explain why and will keep a record of your request on our file. If any of the personal information we hold about you is incorrect, inaccurate or out of date you may request that we correct the information. If appropriate we will correct the personal information. At the time of the request, otherwise, we will provide an initial response to you within seven days of receiving your request. Where reasonable, and after our investigation, we will provide you with details about whether we have corrected the personal information within 30 days. If we refuse to correct personal information we will provide you with our reasons for not correcting the information.

Using government identifiers
If we collect government identifiers, such as your tax file number, we do not use or disclose this information other than required by law. We will never use a government identifier in order to identify you.

Collection of sensitive information
Personal information concerning particular topics is regarded as sensitive information. Sensitive information includes information about your:

  • racial or ethnic origin;
  • political opinions;
  • membership of a political association;
  • religious beliefs or affiliations;
  • philosophical beliefs;
  • membership of a professional or trade association;
  • membership of a trade union;
  • sexual preferences or practices;
  • criminal record; and
  • health.

We generally have very limited need to obtain such information, however if such information is needed then it will only be obtained and/or used with your consent. If, in the course of arranging your application or facilities, such information does come into our possession from a third party, we will seek your consent to collect, store and use this should we consider such use necessary in your application.

Our Privacy Policy may change from time to time
We constantly review all our policies and procedures to keep up to date with changes in the law, technology and market practice. As a result we may change this Privacy Policy from time to time. This Privacy Policy was last amended in February 2014.

Complaints
If you are dissatisfied with how we have dealt with your personal information, or you have a complaint about our compliance with the Privacy Act, you may contact our complaints officer on 1300 554 333. We will acknowledge your complaint within seven days. We will provide you with a decision on your complaint within 30 days. If you are dissatisfied with the response of our complaints officer you may make a complaint to the Privacy Commissioner which can be contacted on either http://www.oaic.gov.au or 1300 363 992.

Contacting us
If you require further information regarding our Privacy Policy, please contact us at the following address, SuperEasy Pty Ltd, PO Box 610, Black Rock VIC 3193. Should you wish find out more about the privacy legislation or the Australian Privacy Principles, we recommend that you visit the Federal Privacy Commissioner’s website at http://www.privacy.gov.au


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