SMSF loans for residential and commercial property

Current Lending Policy (Residential Investment Property)

  • Maximum LVR where an individual is trustee of the holding trust - 72%

  • Maximum LVR where company is trustee of the holding trust - 80%

  • Serviceability of the new loan must come from proposed rental income, super contributions and/or existing earnings within the super fund.


How does it Work?

Your SMSF wants to buy property (either residential, rural or commercial real estate), but it 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 Benefits of using a SMSF to Purchase Real Estate

  • Your SMSF can acquire property worth more than its available funds through the benefits of gearing SMSF assets are secure, as the mortgage lender does not have recourse to your SMSF's other assets in the event of default

  • Your self managed super fund receives all income and capital growth even if the property has not been paid off

  • Your SMSF can use income generated from the property to help pay off the home loan

  • Interest from the home loan may be claimed as tax deductions by the self managed super fundand can potentially reduce your SMSF's tax liability


Features of an SMSF Home Loan

  • The self managed super fund must purchase property from an unrelated party. Purchases must be arms length

  • Investment in property must be consistent with your SMSF investment strategy

  • In the event of a home loan default, the mortgage lender only has recourse to the property used as security and cannot claim any other assets in the SMSF

  • The property is held in trust for the SMSF, which is entitled to its income

  • Your SMSF makes the home loan repayments. After the home loan is repaid in full, the legal ownership of the investment property is transferred to the SMSF

  • You can choose any kind of property including residential, commercial, rural, industrial or retailproperty

  • The legal owner of the real estate will be the Property Trustee

  • The beneficial owner of the real estate is the SMSF

  • As mortgage lender has no recourse to the other assets in the SMSF, this provides the SMSF with protection for its other assets

  • The home loan used to purchase the property through the SMSF are personally guaranteed by the member/s of the SMSF

  • SMSFs can deal with the property in the same way as investors would deal with 'normal' investment properties outside of the self managed super fun. For example, you can still lease out the property, renovate, make repairs etc. However, this is subject to the terms and conditions of the home loan

  • Rent is paid directly to the SMSF. Home loan repayments are made in the ordinary way from theSMSF

  • The SMSF can pay out or reduce the home loan at any time - subject to the terms of the relevanthome loan

  • When the home loan is paid out in full, title to the property can be transferred to the self managed super fund or the property

  • The trustee can continue as registered proprietor