Self Managed Super Fund Lending (SMSF)
If you have a self managed Super Fund (SMSF) it can now borrow funds to purchase a residential, retail, commercial, rural or specialised property.
The changes to Legislation occurred in September 2007 when The Superannuation Industry Supervision Act (SIS ACT) was amended to allow super funds to borrow funds provided an agreed structure was utilised.
In essence a Security Trustee will purchase the property on behalf of the SMSF and become the legal owner of the property holding it in trust for the SMSF (as beneficial owner). The SMSF will provide an equity contribution from the Superannuation Funds assets and borrow the balance of the funds.
The Basics:
- It is a Loan to the Self Managed Super Fund (SMSF) to assist in the acquisition of eligible income producing real property;
- the money borrowed is applied to the purchase of an asset;
- the asset is held in trust and the self managed super fund (SMSF) acquires a beneficial interest in same;
- the SMSF has the right to acquire legal ownership by making payment;
- The SMSF loan is 'Limited Recourse', meaning the lender cannot touch any other SMSF assets other than the property held as security, in other words the rights of the lender against the SMSF in the event of default are limited to the security property.
Key benefits:
- Maximum of 15% tax on rental income;
- Any expenses such as interest, may be claimed as tax deductions by the SMSF super fund
- Potentially there may be no capital gains tax on sale of property if sold in pension phase;
- A maximum 10% capital gains tax on sale of property if held for at least 1 year;
- Greater investment choices and control over your future;
- The SMSF super fund can pay out or reduce the mortgage at any time (subject to the terms of the relevant loan);
- Through gearing, the super fund can acquire property for a greater value than that of the funds 'net worth'
- All other SMSF super fund assets are safe and cannot be touched by any lender due to the limited recourse provisions in section 67 (4A) of the SIS (Superannuation Industry - Supervision) Act
At GCC we can offer you a true full package solution including arranging the SMSF loan together with the provision of the necessary legal structure to comply with the required Legislation.
If you would like to speak to one of our consultants for further information on SMSF finance contact Global Capital Commercial on 02 9222 9100 or if you would prefer one of our consultants to contact you please complete and return our one page enquiry form.
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