Borrowing in a Self Managed Super Fund

Before September 2007 the self managed superannuation rules on borrowing in a self managed super fund were very strict on being able to borrow to invest the self managed super funds for the retirement of the fund member.

However, following the recent changes with the Superannuation and Industry Supervision Act (SIS) in September 2007, self managed super fund trustees can generally use borrowed money to acquire any asset they would be allowed to invest in directly. This includes real estate, shares and managed funds.

There are however a range of self managed super fund borrowing considerations for the trustees to decide on whether the self managed super fund should borrow to invest.   The rules are still strict and we would strongly advise that you speak with a professional self managed super fund specialists and financial planner 

Borrowing in a Self Managed Super Fund rules include:

  • The asset is held in trust so the SMSF acquiries a beneficial interest;
  • Security can only be given over the asset being bought
  • Other assets within the self managed super fund cannot be used as security, therefore ensuring that there is limited risk.

For more information about borrowing in a self managed super fund and for a full discussion concerning the up to date rules and legislation call our SMSF specialists on 1300 587 673


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Borrowing in a Self Managed Super Fund Examples

Example 1 – Commercial Property

If you own a commercial property personally, irrespective of whether you or someone else operates a business out of those premises; this property could be transferred into your family superannuation fund.
A Husband aged 53 and his Wife aged 51 jointly own a commercial property valued at $800,000
Assuming that they have used their concessional contribution caps, one scenario is that the Husband and Wife could use their current financial year non-concessional contribution caps of $150,000 each, and borrow the remainder, either through a vendor finance loan or through a financial institution, to transition the asset into the family managed super fund.

Example 2 – Residential Property

Ordinarily, a family superannuation fund can not acquire residential property from its members.  However, if you have a substantial portfolio of residential property that is operated in a business-like manner, then it is possible for the portfolio to be transferred into a family superannuation fund. 

The above self managed super fund borrowing examples are for illustration purposes only, you should seek the advice of a self managed super fund borrowing specialist before taking action.

Contact Leenane Templeton for further information about borrowing in a self managed super fund