How this lending option works
An SMSF property loan is specialist lending within a regulated superannuation structure. The fund, investment strategy, property, limited recourse borrowing arrangement and cash flow must be reviewed by appropriately qualified legal, tax and financial advisers before contracts are signed.
- Residential and commercial property
- Limited recourse borrowing arrangements
- Coordination with your accountant and solicitor
Limited recourse borrowing arrangements
SMSF borrowing is generally structured so the acquired asset is held separately and the lender's recourse is limited to that asset, subject to the arrangement and law. Documentation and ownership must be established correctly before purchase; errors can be expensive or impossible to fix later.
Residential and commercial property considerations
Lenders assess fund contributions, liquidity, rental income, member position, property type, deposit and costs. Related-party use and transactions are restricted. Commercial premises can involve different rules and advice requirements from residential property.
Liquidity, costs and exit planning
The fund needs capacity for repayments, expenses, insurance and periods without rent while maintaining sufficient liquidity. SMSF loans can carry higher establishment costs and fewer lender choices, so the strategy should be tested beyond the initial purchase.
Common questions
Can my SMSF buy a residential property for me to live in?
Generally, SMSF assets must satisfy the sole-purpose test and residential property cannot be used by members or related parties. Obtain specialist advice before considering any transaction.
Can an SMSF renovate a property using borrowed money?
Borrowing and improvement restrictions are complex. Repairs and improvements can be treated differently, and changing the asset may breach the arrangement. Obtain legal and tax advice before work begins.
Should the bare trust be established before signing?
The correct sequence and purchaser name can depend on the state, contract and structure. Your SMSF solicitor and accountant should confirm the documents before you sign or pay a deposit.
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