SMSF property loan solutions from leading Australian property lenders
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Is this loan for me?
SMSF property loans are for people who:
- Have an existing self managed super fund (SMSF)
- Are in the process of establishing an SMSF
- Require a new SMSF to be established
- Want to buy a new property as part of their SMSF
- Want to refinance a property as part of their SMSF.
What happens next?
It is important to discuss the structuring of your SMSF before you start.
Each lender has different requirements before they will lend funds to invest in property using your SMSF. Lenders may require you to use their “in-house” trust with limited recourse borrowing.
There is no “one size fits all.” Our SMSF specialists can answer any questions that you may have about your options. Avoid duplication costs such as trust deed amendments and stamp duty, speak to us today.
You won’t need any documents at this stage.
Common questions when considering an SMSF property loan
Before you start to draw a pension from your SMSF, any rental income received by your SMSF will be taxed at a maximum of 15%. And, if the fund sells the property after holding it for at least one year, your fund will only pay capital gains tax on the sale of the property of up to 10%.
Comparatively, if you were to buy the same property in your own name, rental income would be taxed at your personal tax rate (which could be as high as 46.5%). This tax rate would also apply to any capital gains payable on the sale of the property (albeit after receiving a 50% reduction if the property was held for more than one year).
After reaching age 60 and genuine retirement, income drawn from your SMSF is tax free.
Assets held in a superannuation fund (including property) are generally protected from creditors in a bankruptcy.
You should find out all the costs before signing up, each lender has different fees and terms for setting up a SMSF property loan.
- Establishment fee can range from $395 to $1,500 for residential property
- Valuation fee from $Nil to $275 for residential and on quote for commercial
- Solicitors fees can range from $495 to $3,000
- Settlement fee $75 to $250 for residential property
These fees may not include the cost of establishing the SMSF trust deed with limited recourse borrowing.
Other fees to consider can be:
- Guarantor administration fee
- Account management fee
- Any other fees or charges that may be payable.
Make sure you are provided with disclosure of all fees and charges before you enter into any SMSF loan contract.
Depending on the lender’s requirement for financial advice, financial advice fees may be additional
Some lenders will make an assessment using the SMSF income only, rental income from the investment property and ongoing contributions to your SMSF and may not need to see your individual or company financials.
So if you have found a property that demonstrates a high rental yield, and you have sufficient time until retirement, then this may be all that is required to service your SMSF loan.
Other lenders will require an assessment which also includes your individual, company financials and tax returns for the last two years.
As a guide you can borrow up to a maximum 80% of the valuation of the intended property purchase. Some lenders have a maximum lend of 70%. The deposit needs to be the difference and will also need to include all the up front costs including stamp duty. Your existing superannuation funds can be used to cover the deposit and up front costs .
Each lender will have a particular requirement in relation to the advice that is required. It is important to have a complete understanding of both the benefits and the risks of investing in property using a SMSF loan. As trustee, you are ultimately responsible to comply with the SMSF rules.
As a rule you should have sufficient surplus cash within the fund after the purchase, to cover ongoing costs and unexpected outlays such as maintenance or vacancy. Some lenders require that you have at least $200,000 in your super fund before considering an SMSF loan for property purchase or a minimum balance after purchase. Again, there is no “one size fits all” as each lender will have there own requirements.
The question should be, why would you not use a broker that specialises in SMSF loans?
Here’s a few of the reasons:
Your current bank may not offer SMSF lending as it is a specialist lending area and some are not able to provide or don’t wish to provide SMSF loans.
Each lender has varying requirements for the structure of the SMSF trust, whether they require a corporate trustee or individual trustee or in fact, require you to use their in house trust deed.
Some lenders require that you have minimum superannuation assets before considering an SMSF loan to you, or that you have a minimum fund balance after the property purchase.
Assessment criteria varies between the lenders some require additional documents such as personal or company financials and tax returns beyond the SMSF. Some will only require assessment on the income in relation to the SMSF trust itself.
Talk to us today and we can investigate your best options after careful consideration of your particular financial circumstances and current financial position.