What is it?

An SMSF (Self-Managed Super Fund) is a private super fund that you manage yourself.

An SMSF loan or Limited Recourse Borrowing Arrangement (LRBA) allows you to leverage the funds in your SMSF to purchase an investment property. This has increasingly become a trend among Australians who are learning to take control of their retirement planning and switching to SMSFs for investments.

How Does it Work?

SMSF loans allow SMSF trustees to borrow money to purchase an investment property through funds in their SMSF. Ownership of the purchased property is then held in a custodian trust until the loan is fully repaid. Through the duration of the loan, the SMSF members have a beneficial interest in the property. Any income generated is then re-invested into the SMSF to help repay the home loan or increase the fund value.

Interest & Lending Criteria?

SMSF Loans are generally more complicated than a standard home loan. Only a limited number of lenders offer SMSF loans and the criteria continue to change, so it’s always wise to speak to one of our Brokers before you start with the loan process.

Key features of SMSF Loans:

• Interest rates start from 5.64%
• LVR up to 80% for residential properties & up to 70% for commercial properties
• An offset account for the SMSF is sometimes offered
• Some lenders have introduced a minimum cash buffer requirement. This is to ensure that the fund has sufficient cash reserves to cover repayments (even during non-rental periods) as well as for ongoing administrative costs.

Tax benefits for SMSF

• Tax deductions for loan repayments
• Exempt from capital gains tax once the members retires
• Lower tax rate for rental income
• Some investment-related insurance may be tax deductible
• Property depreciation may be tax deductible