What is SMSF?
It’s a self-managed superannuation fund (SMSF) that you control. The Australian Taxation Office is in charge of it (ATO). SMSFs can have up to four members who must serve as a trustee. They’re responsible for the fund’s decisions and adhering to all applicable laws. The main purpose of an SMSF is to help you save money for your golden years.
Things You Need to Know About SMSF
When it comes to Self Managed Super Funds (SMSF), there are a few things you should know about before considering borrowing money within your fund. Here we cover some key points on SMSF loans.
Setting up a SMSF loans can be a great way to take control of your retirement savings and invest in a way that suits your lifestyle and investment goals. However, SMSF also comes with a fair share of responsibility.
What is the SMSF Application?
You’ll have to submit an SMSF loan application for your loan to be granted. Each lender will have its own set of requirements, but the most common is that they want a copy of the trust deed for the SMSF, the trust deed for the custodian, and the contract of sale.
For this reason, you’ll likely be asked for documents such as SMSF bank statements and tax returns, along with an estimate of your annual rental income and an audit certificate from your fund’s auditor. The lender uses this information to confirm that everything is in order and that you can make the required loan repayments.
The seven-step process for securing an SMSF loan is as follows:
- You’ll first establish your SMSFs.
- Working out the Property Trust Deed outlines who will own what and where it’s located with other properties.
- You then give instructions from advocates/conveyancers.
- Get approval of your loan from a bank.
- Now it’s time to exchange contracts.
- Your finalized agreement is ready to issue.
- After that, you can collect your money!
One of the key responsibilities of being an SMSF trustee is ensuring that the fund complies with the superannuation laws. It includes ensuring that the Self Managed Super Fund does not borrow money, except in very limited circumstances.
If you are thinking about borrowing money within your Self Managed Super Fund, it is important to seek professional financial advice first. Several restrictions and rules apply to SMSF loans, which can be complex.
Here are some key things you need to know about SMSF loans;
- The total amount that you can borrow is generally limited to 80% of the value of the underlying assets.
- You can use the loan to purchase a single asset or a collection of similar assets.
- The asset purchased must be held in a trust to benefit the Self Managed Super Fund.
- The loan must be secured by a registered mortgage over the asset purchased.
- The Self Managed Super Fund must have enough cash flow to make the loan repayments.
The best way to invest in properties or different assets is Self Managed Super Fund loans, but several rules and restrictions apply. With the help of a financial adviser, you can make sure that you are aware of all the risks and obligations involved before taking out an SMSF loan.