MPR Finance Insights
Lenders introduce new SMSF facilities
 As you're aware from our previous newsletters and seminars, Self Managed Super Funds (SMSFs) can now borrow to invest.Subject to meeting certain conditions, these arrangements may be used to acquire assets such as residential or commercial property and shares.
To qualify as an allowable borrowing under the new laws, the following key conditions must be satisfied:
- The SMSF would not be prohibited from investing in that asset directly (i.e. must not be an in-house asset or assets acquired from members of the SMSF apart from business real property or listed shares)
- The asset is held in a special security trust so that the SMSF acquires a beneficial interest in the asset
- The SMSF has a right to acquire, but is not obligated to acquire legal ownership of the asset by making one or more future payments
- The loan is limited recourse which means that the lenders rights for default on borrowing and any interest owing are limited to the underlying asset only.
A number of lenders have now introduced products aimed at the SMSF market.
While borrowing for investment in your super fund enables some innovative opportunities, it is important that you seek advice about your specific situation and whether your funds deed and investment strategy complies with the new borrowing rules and regulations.
If you would like to investigate borrowing for your SMSF and obtain advice about your circumstances, please contact Marc Peskett (marcp@mprgroup.com.au) or Archie Para (archiep@mprgroup.com.au) at MPR Private Client Services.
Case study in SMSF lending
John and Sue have a business that requires larger premises.They would like to buy a $500,000 warehouse.Their combined SMSF balance is $300,000.As trustees of their SMSF they borrow $300,000 and purchase the commercial property, granting the lender a mortgage over the warehouse as security.
The business is able to lease the property back at market rates. John and Sue use the rent and contributions to repay the debt.
What the lenders are offering
There are a number of products on the market, with additional ones being introduced. Choosing the right facility will depend heavily on your personal circumstances. To help give you a sense of what’s presently available, below is a summary of the key features of these loans.
| Loan to value ratio |
Ranges from 50 - 70% |
| Interest rate |
Variable rates between 10 - 12%
Fixed options between 10.7 - 11.7% |
| Upfront costs |
Establishment fees 0.6 - 1.1% of loan amount
Legal costs $1,000 - 3,000
Valuation fees around $1 per $1,000
Some lenders charge monthly fees of between $60 - 200 |
| Loan term |
Varies between 1-3 years, up to 10-15 years |
| Interest only period |
Typically 3 years, with some lenders offering up to 5-10 years |
| Ongoing monitoring |
Loan facilities are generally subject to annual reviews |
| Information required |
SMSF trust deed
Security trust deed
SMSF financial statements
Commercial lease
Contract of sale
Custodian and member details
Tax returns for SMSF and related entities
Proof of rental income |
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