SMSF Loan | Marshan Real Estate

SMSF Loan: A Guide for Self-Managed Super Funds

Learn how to borrow money for your SMSF and invest in property or other assets

What is a SMSF loan?

A SMSF loan is a type of loan that allows a self-managed super fund (SMSF) to borrow money from a lender and use it to buy an asset, such as a residential or commercial property, shares, or managed funds. The asset is held in a separate trust, called a bare trust or a holding trust, and the SMSF has the beneficial interest in the asset. The SMSF can also receive income from the asset, such as rent or dividends, and use it to repay the loan.

What are the benefits of a SMSF loan?

A SMSF loan can offer several benefits for SMSF members, such as:

Increasing the diversity and value of the SMSF portfolio
Accessing tax advantages, such as concessional tax rates on income and capital gains from the asset
Having more control over the investment strategy and decisions of the SMSF
Building wealth for retirement and estate planning

What are the risks of a SMSF loan?

A SMSF loan also involves some risks and challenges, such as:

Higher costs and fees, such as interest rates, establishment fees, legal fees, and ongoing charges
More complex and strict rules and regulations, such as the limited recourse borrowing arrangement (LRBA) rules, the sole purpose test, and the in-house asset rules
More responsibility and liability for the SMSF trustees, such as ensuring compliance, managing cash flow, and meeting loan repayments
Potential losses or negative returns from the asset, such as market fluctuations, vacancy rates, or maintenance costs

How to get a SMSF loan?

To get a SMSF loan, you need to follow these steps:

Set up a SMSF and a bare trust, and appoint trustees for both entities
Choose an asset that meets the LRBA rules and the SMSF investment strategy
Find a lender that offers SMSF loans and apply for pre-approval
Arrange the contract of sale and the loan agreement, and ensure that the bare trust is the legal owner of the asset
Complete the settlement and start making loan repayments from the SMSF
Review and monitor the performance and compliance of the asset and the loan

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