SMSF loans are becoming increasingly popular today due to the many tax benefits, ability to access funds held in super for investment, leverage against it, and greater control over how the funds are invested. Borrowing to invest in super was introduced in 2007.

Despite the generally much lower tax % applicable for SMSF’s contribution and return, maintaining a SMSF comes with its own management accounting cost, and regulatory compliance risk. We recommend all clients speak to a financial advisor before making a decision.

Some of the Self Managed Super Fund Loan Features are as below:

· The SMSF must purchase property from an unrelated party (as in the case for residential property). Buying must be arms-length. Refinances are available on a dollar for dollar basis.

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

· The SMSF loan is limited recourse, which means that in the event of a loan defaults, the lender only has recourse to the security property and cannot claim any other SMSF assets.

· The security property is held in bare trust for the SMSF. The SMSF is the one entitled to its income/rent and responsible for making loan repayments.

· The Legal Owner of the security property is the bare trust. The beneficial owner of the real estate will be the SMSF.

· Generally acceptable security includes metro real estate in most capital cities, including residential, and non-specialized commercial property.

· SMSFs can deal with the property, whenever they like, in the same way as investors can deal with “normal” investment properties (e.g.: lease, renovate, repair, or sell), (subject to the terms of the relevant loan and mortgage).

· The SMSF can pay out or reduce the mortgage at any time (subject to the terms of the relevant loan).

· When the mortgage is paid out in full, title to the property can be transferred to the SMSF or the Property.

SMSF is subject to ongoing stringent regulatory requirements. 2% of all SMSF in Australia had breaches recorded against them in 2012 financial year, please click on the video below to find out what the top 9 breaches were from Westpac broker TV.