SMSF Property Lending Guide

There must be sufficient income in the SMSF to support the loan. Oxygen looks at the current income of the SMSF based on the most recent tax return and management accounts, plus the proposed income (if purchasing a new property versus refinancing an existing loan).

Oxygen will look at & take into consideration;

• Employer superannuation contributions.
• Additional voluntary contributions (non-concessional).
• Rent income on the new investment property (existing rent if refinance).
• SMSF dividend & interest income

There are restrictions on SMSF loans which prevent some transactions from taking place. For example:

• Construction loans are not available.
• Buying a property in your SMSF that you intend to live in as a home is not allowed (owner-occupied business premises are acceptable).
• Selling a residential property to your SMSF, that you or a related party owns is not allowed (commercial property is acceptable).

With Oxygen the process of applying for a SMSF loan is straight forward. We are here to help you along the way. Compared to a regular home loan, there are more documents you have to obtain and share with us, which can take some time in preparation.

Reach out via the contact us form to start the application

Yes. You will have to use a broker who is registered with Oxygen, so they can select our products. We have a broker finder tool at the top of our web site you can use, or simply call our 1300 855 699 number and we can help.

A SMSF is a special type of trust that people can set up to manage their own superannuation.

Like a normal super fund, your employer contributions still get paid into the fund, and you can make additional contributions as you see fit.

However, unlike a normal super fund, the trustee (either you or your company) has direct control over the assets that your superannuation is invested in.

Many people also use their SMSF to help plan for their retirement and assist with tax planning.

There are laws restricting the use of SMSFs to borrow money, and restricting the recourse of the lender in the event that the trust cannot meet its repayment obligations.

A basic outline of the rules a trust must follow in order to borrow money is as follows:

• The asset is an asset the SMSF could otherwise legally acquire (if it had the funds).
• The asset is held on trust for the SMSF using a security trust (known as a security custodian).
• The SMSF acquires a beneficial interest in the asset from the outset.
• The SMSF has the right to acquire legal title from the security trustee upon making all loan repayments.
• The lender must only have limited recourse against one particular asset. This means that in the event of a loan default, the lender must not be able to claim any other assets of the fund.
• Each borrowing arrangement can only be for a “single acquirable asset”. In the case of strata title or subdivisions, each title is considered a separate asset.

The majority of lenders do not lend to super funds to buy investment properties because of the smaller size of the market, the complexity of trust loans and because the lender’s recourse is limited to the asset itself.

What does this mean? To a lender, it is more work, for a higher risk loan with a lower profit.

Oxygen SMSF Loans are straight forward and we can help you along the way.

We recommend that you apply for the loan at least two weeks before you begin looking for a property.

This process can be expedited if required. However, it is always best to allow additional time to avoid disappointment.

To begin with, contact us to get the application process started.

Borrowing in an SMSF is more complicated than applying for a normal home loan!

We find that many of our customers take around a week to collate the documents required to apply for the loan, and then it often takes another week to assess and accept the application.

The loan is made out to the trustee of the SMSF in its capacity as a trustee with the security custodian as mortgagor.

Oxygen SMSF Loans have limited recourse, and if the loan is in default, we have no ability to claim the other assets held by the trust. We usually require guarantees from the members of the superannuation fund.

Yes! Oxygen SMSF offers the most competitive loan rates in the market.

You are likely to pay a significantly higher rate if you only talk to your current bank.

It’s a common misconception that you don’t need a deposit to buy a property in your SMSF.

In actual fact, you need a minimum of 24% to 25% of the purchase price to cover your 20% deposit and the other costs such as stamp duty. So why do people say that you don’t need a deposit?

The reason is that your existing superannuation can be your deposit. If you have $100,000 in a managed super fund, then you can move this to your SMSF and use it as a deposit to buy a property.

Effectively this means that you may not need to save a deposit in your own name like you would for a traditional investment property purchased outside of your super fund.

If you are close to the retirement age, then Oxygen may not accept your super contributions in the assessment.

If you no longer have a personal income then, of course, your super contributions will cease.

In this case, Oxygen may shorten the loan term or reduce the amount of the loan so that the rental income can cover the repayments.

Oxygen will look at & take into consideration;

• Employer superannuation contributions.
• Additional voluntary contributions (non-concessional).
• Rent income on the new investment property (existing rent if refinance).
• SMSF dividend & interest income

Your SMSF can buy a commercial property that you already own; however, your fund cannot buy a residential property that is owned by you or a related party.

The penalties for getting it wrong could include paying a large percentage of your superannuation fund balance as penalty tax – so it is best to get good advice from the outset.

We recommend that you discuss any potential tax implications of transferring a property from your name into your SMSF with an accountant that specialises in Self-Managed Superannuation Funds.

To begin with, contact us to get the application process started.