What is an SMSF Loan?
- SMSF Loans (or Limited Recourse Borrowing Arrangements – LRBAs) assist SMSF trustees to borrow money to buy an investment property within their SMSF.
- SMSF Loans benefit people who need to build their retirement savings faster, or would like to hold a key property inside the low tax super environment (e.g. their business premises).
- The money borrowed by an SMSF to purchase assets cannot be held against other assets held by the super fund, meaning that the asset is fully protected from future litigation and bankruptcy.
What types of property can be purchased with an SMSF Loan?
- SMSF Loans can be used to buy commercial property or residential property, it must pass the ATO’s sole purpose test of providing retirement benefits or death benefits to SMSF beneficiaries.
- This means the trustee must be able to prove that the sole purpose of buying the property is to provide retirement income.
- If it is a residential property, the property cannot be lived in or rented by a member of the fund or any related party of the member. Different restrictions apply to commercial property.
Why contact an Insight Finance specialist?
There are a lot of requirements and restrictions surrounding SMSF Loans, which make them more costly than other property loans.
In addition, few lenders offer SMSF Loan refinancing services, this is why it is crucial to get the right information and support from the start.