SMSF Loan Setup

Understand the SMSF setup process to acquire property loans.

The SMSF Process

Establish a trust

The first step in setting up an SMSF or self-managed superannuation fund is establishing a trust. Once this has been done, you need to register it with the Australian Taxation Office (ATO.) Every member of an SMSF must be either an individual or a corporate trustee. If you choose to have a corporate trustee structure, each SMSF member must be a director of the company.

Organise the trust deeds

An SMSF trust deed is a legal document that governs the operation of a self-managed super fund. This trust deed should be written to suit the superannuation laws and include important information such as the names of trustees and members and what the fund is used for specifically.

Read and sign a declaration

The SMSF setup process also includes the signing of a Trustee declaration. As a trustee or director of the corporate trustee of an SMSF, you are obliged to sign a document stating that you understand these obligations and duties.

Open an account

Your self-managed super fund requires a bank account separate from its members’ individual accounts. This is mainly because of the specific income tax requirements for these types of funds. To make this bank account, you need to pay certain initial fees. These include an annual supervisory levy, accounting services, member benefits and tax liabilities.

Register with ATO

Once you’re done setting up an SMSF and all trustees have been appointed, you have 60 days to register the fund with ATO by applying for a tax file number & Australian business number.

Why set up an SMSF?

The main benefits of self-managed super funds are that they allow you to contribute more than the concessional contribution limit, they allow you to make after-tax contributions, and they have higher contribution limits than employer-sponsored schemes. SMSF holders also have greater control over their investments because they can choose the assets that suit them best. They can get SMSF loans to fund their residential or commercial property investments

They also don’t need to pay for administration and investment advice which is often required with other forms of super funds. So, as long as you’ve done the SMSF setup correctly, you can create a better investment strategy, grow your fund and secure the financial future of the fund members.

How can SMSF borrow money to acquire property?

Once you’ve set up your own SMSF, you can use the super fund to increase your borrowing capacity and secure a loan for an investment property. According to superannuation law, SMSF trustees cannot borrow money except when borrowing under a LRBA or Limited Recourse Borrowing Arrangement. An LRBA is a loan to an SMSF for the sole purpose of acquiring an asset—and you can get it with our help.

Another good aspect of an LRBA is it offers protection against the other retirement investments owned by the SMSF. It’s a non-recourse loan, so the SMSF lender can’t come after the other SMSF assets if the fund fails to repay the loan. So when you set up an SMSF to buy a property and other assets, you’re making a good move for your fund.

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