Archive | September, 2013


17 Sep

If you run a SMSF setup you can invest in any kind of property. It can include residential property, commercial property, and industrial property or maybe even a farm. When SMSF uses an LRBA to purchase an asset, there are some arrangements that need to be satisfied. So here are some SMSF borrowing tips. The SMSF uses the borrowed money to buy a single asset or a collection of identical assets that are of the same market value. The SMSF setup cannot use the LRBA money to improve a set of purchased assets. The SMSF trustee will receive the SMSF borrowing in the purchased assets but the legal ownership of the asset is held by the trust. The SMSF trustees have the right to get the legal ownership of the asset by making payments by one or more methods. Any sort or recourse that the lender has under the LRBA against the SMSF trustees is limited only to the single fund asset which includes the right to income. The lender can also legally demand a person to provide a personal guarantee against personal assets. Only in very specific cases assets subject to LRBA can be possibly replaced.


The concept behind purchasing a property within the SMSF setup is very simple. The property is purchased in the name of the super fund that uses money from the fund and then all the rent from the property is later paid back to the fund. Like earlier said the SMSF setup can be used to buy any kind of property including residential property, commercial property, retail or any kind of real estate. But there are a number of restrictions which may apply to property investment. In the past the SMSF borrowing could only purchase property using its own funds which then meant that super funds were not large enough to support such a purchase. But now however, SMSF can borrow money that has opened up the property option to many people. SMSF is normally restricted to eighty percent of the total value of the property that needs to be purchased. It is also important to have a healthy cash buffer to cover for all emergencies. It is always better to be safe than sorry. And it is a good idea to always have a cushion to cover for sudden unexpected surprises.


With SMSF setup you can establish your own investment strategy and can directly control where and how you’re super is invested. You also have a  wide range of options to choose from that include listed shares, some unlisted shares, collectibles that also include art work, stamps and coins, residential and business property. This is one fund that you can set up for yourself and three other members of your family. SMSF borrowing can enable you to invest in assets of higher value in which you can achieve greater estate planning flexibility and reduce fund costs. With SMSF you can also take greater control of the timing of tax events like starting a pension without triggering capital gains tax etc.