Understanding SMSF Loan Regulations
Australians love the idea of homeownership and investing in properties. You’ll catch them talking about property, whether at a family picnic, after a parent orientation or in the office pantry. If you feel the same way, you can easily do so by taking out a self-managed super fund (SMSF) property loan. However, there are strict SMSF loan regulations you need to adhere to if you want to purchase assets such as real estate, managed funds or shares.
You could only borrow money through your SMSF provided sufficient funds are available. SMSF home loans offer diversification where you don’t need to use the entire portion of your funds to acquire a single asset. For example, if you have $200,000 in your SMSF, you can loan a fraction of it as a deposit on shares and the other as a real estate deposit. Another significant advantage is the tax advantage, where you could inherently enjoy zero capital gains tax on property assets if you keep them in your SMSF until retirement.
SMSF Rules and Regulations
As a fund trustee, you need to understand the strict SMSF loan rules and regulations. Here are the key pointers you need to be familiar with.
- Superannuation Industry (Supervision) Act 1993 – This is also called the SIS Act and the governing legislation for SMSFs.
- Core Purpose – Each SMSF member can benefit at least one on either the member’s retirement, member’s death and benefits or when the member is on the legal age to access their super.
- The Sole Purpose Test – An SMSF must be maintained so that their dependents can enjoy benefits if a member dies or upon the member’s retirement.
- Ancillary Purpose -It pertains to the member’s benefits during financial difficulties such as cessation of work due to sickness, termination of member’s employment, another purpose approved in writing by the regulator or the death of a member after retirement.
- Accepting contribution – Under the SIS regulations, there is a minimum standard for accepting more complex contributions from age 65.
- Types of contributions:
- A concessional contribution is assessable to the SMSF. This includes ATO of SG payments, contributions paid to an award/agreement, salary sacrifice, superannuation guarantee (SG) and personal contributions.
- Non-concessional contributions are not included in the assessable income, such as personal post-tax contributions, spouse contributions and overseas transfers.
- Investment restrictions – Some regulations govern how an SMSF may invest its assets to protect its members.
SMSF Loan Requirements
Here are the main requirements for SMSF loans.
- The sole purpose of acquiring the property is to provide retirement or death benefits to SMSF beneficiaries.
- The member must not acquire the residential property from a member of SMSF or any related party.
- The member of the SMSF or any related party must not live in or rent the residential property.
- Any property should be a single acquired asset.
A member can buy or lease commercial property from a fellow SMSF member, and it should be used for business propose only with a fair market value.
What You Need to Get Your SMSF Loan Started
The first step in setting up an SMSF loan is establishing a trust which needs to be registered with the ATO. If you’re wondering about the monetary requirements of setting up an SMSF, some advisers suggest a budget between $250-$500k to establish your own fund. But, take note, you must also have to pay $1500-$2000 in annual admin costs.
The next step is to organise the trust deeds and make sure they suit superannuation laws. Also, you must indicate the names of trustees and members and the fund purpose.
The third step is to read and sign a declaration stating that you understand the duties and obligations as a trustee. Lastly, an SMSF requires a bank account separate from its member’s individual account.
Contact SMSF Loans CO. Today!
Are you serious about investing in real estate but don’t know the right lending strategy to meet your financial goals?
When it comes to SMSF residential or commercial lending, SMSF Loans CO. will help you get the most competitive loan interest rate.
Contact us today to schedule a phone consultation with one of our talented SMSF loan experts!
You may also like
The Self Managed Super Fund (SMSF) sector is growing rapidly in Australia. This is mainly due to the attractive benefits SMSFs offer, such as tax …
If you’re considering investing via an SMSF, the first thing to do is to undertake a review of your current super before deciding on an …
There are still some myths and misconceptions about SMSF loans, how they work, what they do and what they don’t do. So today I thought I …