SMSF Lending

A Self-Managed Super Fund (SMSF) is a private superannuation fund where the members are also trustees and have control over investment decisions made within the fund. SMSF loans facilitate borrowing against the superannuation fund for investment in assets such as residential or commercial property.

The highly regulated and specialised SMSF industry is dominated by savvy investors who want to grow their property portfolios, and existing business owners who want to save (through tax concessions), and make money via the purchase, and often potential leaseback, of commercial property.

Any returns on the investment such as rental income or capital gains are directed back into the super fund to help increase the fund’s retirement savings.

When it comes to securing successful finance it’s important to note there are only a few lenders who will lend to SMSFs and application requirements can vary significantly.

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Types of business property commonly purchased via SMSF:

  • Commercial offices
  • Industrial units/complexes
  • Doctor/dental/veterinary surgeries
  • Retail shops
  • Shopping centres
  • CBD office buildings (< 5 Floors)
  • Factory / warehouse / showroom
  • Guest & boarding houses
  • Panel beaters / smash repair shops
  • Childcare centres

Current SMSF Borrowing Guidelines:

LVR:
Deposit:
Fund Balance:
Loan Terms:

up to 80% of the property value
20-35%
minimum of $100k is recommended
up to 30 years

The trust will need to prove sufficient income to support the loan.

Your Green Team specialist finance broker will be in the best position to provide you with an overview of actual lenders, loan terms, conditions and costs based on your situation.

Our six-step guide to SMSF borrowing

  1. SMSF Structure: An SMSF is a private superannuation fund in which the members are also the trustees responsible for managing the fund and making investment decisions.
  2. Borrowing Structure: The SMSF sets up a separate trust, known as a bare trust or holding trust, to facilitate the borrowing. The bare trust is established solely for the purpose of acquiring and holding the asset on behalf of the SMSF.
  3. Loan Application: The SMSF trustee applies for a loan from a financial institution. The lender provides the funds to the SMSF, which are then used to purchase the investment asset. Typically, the SMSF must provide a cash deposit, usually a minimum of 20%-35% of the property’s purchase price depending on the asset.
  4. Limited Recourse: The loan is structured as a limited recourse loan, meaning that the lender’s recourse is limited to the asset purchased with the borrowed funds. In other words, if the SMSF defaults on the loan, the lender’s claim is limited to the specific asset and not the other assets held within the SMSF.
  1. Repayment and Ownership: The SMSF is responsible for repaying the loan using its available funds, such as rental income from the property or contributions made by the SMSF members. The asset is held in the name of the bare trust but is beneficially owned by the SMSF.
  2. Compliance and Regulations: SMSF loans are subject to specific regulations and compliance requirements set by the Australian Taxation Office (ATO). It is essential to adhere to these regulations to avoid penalties or adverse tax consequences.

Seeking advice from experienced SMSF professionals such as accountants, financial and tax advisors is required to ensure compliance and optimise investment outcomes. Your Green Team broker can also provide recommendations for proven professionals in these fields.

For more specific information on SMSF loans for you or your business, get in touch with your Green Team finance broker today.

Our SMSF Lending Specialists

Daniel Green

Director

Australia's leading hospitality, accommodation and childcare finance specialist and winner of Australian Broker of the Year 2022.

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James Kelder

Finance Consultant

One of Australia's most in-demand commercial finance brokers and awardee of Best Finance Broker 2024 (Better Business Awards), James specialises in commercial property investment and development finance.

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LATEST SMSF Lending ARTICLE
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"Pros vs Cons: Using a Self-Managed Super Fund (SMSF) to purchase commercial property"

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