SMSF finance is a relatively new area in the field of commercial and residential property loans. It was in 2007 that new legislation was passed allowing self-managed super funds to acquire properties with property loans. Global Commercial Capital is one of Australia’s leading provider of SMSF finance facilities, with decades of experience in the lending arena. Whether you need Self Managed Super Fund Loan for a commercial or residential property, GCC can help. Our experienced financial specialists will help you customize a SMSF loan that is both beneficial and in line with your long-term monetary goals.
Why Choose GCC?
- GCC provides clients with easy access to over virtually all Self Managed Super Fund lenders across the country.
- Our dedicated team of loan specialists works one-on-one with each of our clients to create an individualized Self Managed Super Fund facility, taking into account each client’s unique requirements.
- We help customize structures for your property purchase, including commercial and residential properties, as well as rural estates.
- Speedy processing time frame, meaning that you get your SMSF finance loan right when you need it.
What is a Self Managed Super Fund Loan?
SMSF finance allows the trustees of a self-managed super fund to apply for property loans in order to purchase income producing property. Loans are available from both private and bank lenders and can be used to purchase any commercial, residential, or rural property. The Self Managed Super Fund is required to contribute equity to the purchase of the property which is then held in trust for the Self Managed Super Fund by a security trustee who is typically appointed by the lender. The Self Managed Super Fund can benefit from the income generated by the property, but cannot acquire full rights to the property until the loan is paid back in full.
Basic Features of SMSF Finance
- Self Managed Super Fund loans can only be used to purchase an income generating property such as a restaurant, a manufacturing facility, or even a fruit farm. The property can be commercial, residential or rural – the only stipulation is that is must produce an income.
- A Self Managed Super Fund loan may not be used to develop or refurbish a property – it is intended as a means of funding solely for the purchase of property.
- A residential income producing property acquired by means of a Self Managed Super Fund facility cannot be used as a permanent residence by any trustee of the Self Managed Super Fund. It can only be used in this way once the loan is repaid and the Self Managed Super Fund gains full ownership rights over the property.
- When a Self Managed Super Fund purchases a property using a loan, the property is held in trust by a security trustee until the facility is paid back, with the Self Managed Super Fund acting as a beneficial owner of the property.
- Self Managed Super Fund loans typically incorporate a clause known as limited recourse. This means that in the event of the Self Managed Super Fund defaulting on the loan, the lender is restricted to the original property for which the loan was acquired when trying to recover the funds. The lender cannot go after any other property or assets held by the Self Managed Super Fund in order to recoup its losses.
Categories of Self Managed Super Fund Facilities
- Residential Property SMSF Loans: Available with an LVR of up to 80% and loan terms of up to 30 years.
- Commercial Property facilities are available with an LVR of up to 70% and loan terms of up to 20 years.
- Rural Property facilities are available with an LVR of up to 65% and loan terms of up to 20 years.
- Interest Only facilities are available for any type of income generating property with variable loan terms depending on the nature of the structured facility.
SMSF Finance Loan Restrictions
- SMSF finance can only be used to purchase a property that produces income – it cannot be used to purchase property for personal residential use, nor can it be used to acquire vacant property.
- A loan may only be used for property purchase – it cannot be used in any part for property construction or development purposes.
- SMSF finance guidelines prohibits the borrower from structuring a redraw facility.
- Property purchased using loan facility cannot be leveraged for other loans, but the existing Self Managed Super Fund loan can be refinanced, as long as the terms are compliant with the SIS Act.
- Self Managed Super Fund loans can only be used to purchase a stand-alone property.
If you are thinking of structuring a Self Managed Super Fund loan, let the experts at GCC help you. We can guide you through the process and help you acquire the facility you need quickly and efficiently. To learn more about our extensive range of financial products and how we can help you, call us today 1300 353 926.
Superannuation legislation allows Self Managed Superannuation Funds to borrow money to invest in property and because superannuation is one of the most effective tax investments available, investing in property through an Self Managed Superannuation Fund can save you money in the long run. Lending through your Self Managed Superannuation Fund is complex and certain product and regulatory restrictions apply. It’s important that you seek independent financial planning, legal and taxation advice.
There are many benefits to having a SMSF Loan. Previously customers had little choice with regards to their Super Fund with the alternatives being Warrant Trust structures which were cumbersome and complicated and required large upfront fees along with hefty ongoing fees.
Most funders have now brought out Self Managed Superannuation Fund products which are uncomplicated and easy to understand. The lending rates have now become competitive as more funders are looking to come into this market.
Benefits to a SMSF Loan are:
- Subject to the funders criteria any kind of property can be chosen from Residential to Commercial;
- Commercial property can be purchased for business purposes;
- The Loan is ‘Limited Recourse’ to any other assets of the Self Managed Superannuation Fund;
- The beneficial owner of the property will be the Self Managed Superannuation Fund;
- The property can be managed as any other investment property;
- All rents are paid for the benefit of the Self Managed Superannuation Fund
Investing through your Super Fund is also one of the most tax effective investments available therefore investing through your Self Managed Superannuation Fund can save money in the long run.
Key Features are as follows:
- Super income is taxed at 15%;
- Any expenses such as interest, may be claimed as tax deductions by the Self Managed Superannuation Fund;
- Potentially there may be no capital gains tax on the sale of the property if sold in pension phase;
- A maximum 10% capital gains tax on sale of the property if held for at least 1 year;
- The Self Managed Superannuation Fund can pay out or reduce the SMSF loan at any time (subject to the terms of the relevant loan);
- Through gearing, the Super Fund can acquire for a greater value than that of the funds ‘net worth’;
- Greater investment choices and control over your future
Amendments in September 2007 to the Superannuation Industry Supervision Act 1993 allowed Super Funds to borrow and charge their assets as long as a special structure was used and as long as there was no recourse for the borrowing against the Super Fund.
For the Super Fund to borrow for an investment property it will be necessary to have a special legal structure in place. When an asset is being purchased requirement of the SIS act is that the asset ‘is held on trust’ and that the Super Fund is the beneficial owner to the asset at all times.
New sections added to the SIS act, 67A & 67B allow the Super Fund to borrow provided:
- It is a Loan to the Self Managed Superannuation Fund to assist in the acquisition of eligible income producing security;
- Can only borrow for a single acquirable asset;
- The Self Managed Superannuation Fund acquires beneficial interest in the asset;
- Upon making all repayments the Self Managed Superannuation Fund has the right to acquire legal title from the Trustee;
- The loan is ‘Limited Recourse’. This means that in the event of default the lender cannot touch any other asset other then the asset held as security.
- When purchasing a property the purchase must be an ‘arms length transaction’
Within the legal structure the Trust Deed is an important component of the legal structure and it is important to ensure there is no adverse GST, taxation or stamp duty consequences.