The documentation behind Australia's SMSF property purchases
Since 2007, LRBA Structures has prepared the bare trust deeds and limited recourse borrowing documentation that accountants, advisers and SMSF trustees rely on to settle, guaranteed to pass legal vetting by any lender.
Supplier to
National Tax & Accountants Association (NTAA)
CPA Australia members
Your super fund can borrow to invest, when the structure is right
The SIS (Superannuation Industry Supervision) Act 1993 once prohibited a Self Managed Superannuation Fund from borrowing money to purchase assets. Amendments to the SIS Act now allow Super Funds to invest in any kind of asset and to borrow, charging those assets, so long as there is no recourse for the borrowing against the Super Fund.
Sections 67A & 67B permit a Super Fund to borrow money if:
- the money borrowed is applied for the purchase of an asset;
- the asset is held on trust so that the Super Fund acquires a beneficial interest;
- the Super Fund has the right to acquire legal ownership by making payment;
- the rights of the lender against the Super Fund for default are limited to the security.
The most common asset purchased is either residential or commercial property, however the Super Fund can also acquire other types of assets such as ASX listed shares and company shares. The Super Fund can borrow from a commercial lender, or even from a member of the Super Fund.
The importance of precise documentation
Ever since the Superannuation Industry (Supervision) Act 1993 was amended, LRBA Structures has been establishing the bare trust deed documentation that accompanies Limited Recourse Borrowing Arrangements.
The bare trust deed is a key component within the legal structure, and extreme care is required to ensure there are no adverse GST, taxation or stamp duty consequences. Structures fail lender vetting when deed rules are missing the specific wording and clauses unique to each lender.
Our deeds have adopted significant changes over the years to ensure SIS Act and regulatory compliance while accommodating the individual requirements of the lenders. We guarantee our deeds will pass legal vetting by any lender. In the rare instance a lender's requirements change without notice, we make the necessary amendments speedily, and free of charge.
We can also assist with the wider legal structure: a new Super Fund, updating the governing rules of an existing fund, a new trustee company and more.
Documentation for every part of the borrowing structure
The complete settlement-ready file: deed, agency agreement, auditor's letter of compliance, minutes, statutory declarations, stamp duty and timing summaries, with legal backup at no additional cost.
View the package → Non-Bank Loan DocumentationSIS Act compliant loan agreement, guarantee and indemnity, and acknowledgment and warranties for related-party and private lending arrangements.
View inclusions → Super Fund Deeds & Corporate TrusteesSuper Fund trust deeds with the borrowing provisions s 67A and 67B require, and corporate trustee establishment where your lender requires it.
Learn more →The property investor's guide to SMSFs
Specialist Vic Bulfone gives a broad insight and sweeping overview into purchasing property through your Super Fund, covering the costs and benefits, setting up the fund, the legal structure, investment restrictions and borrowing money.
With specialist Vic Bulfone: costs and benefits, fund setup, legal structure, investment restrictions and borrowing.
Frequently asked questions
How does my Super Fund purchase a property?
The Super Fund chooses the property it wishes to invest in, in the ordinary way. Residential property must be purchased from an arm's length vendor. Non-residential property can be purchased for full value from "related vendors" so long as the property is let for business purposes.
The Contract for Sale must be entered into in the name of the Property Trustee (as owner of the legal interest in the property). The Super Fund obtains a loan approval in the name of the Super Fund, and its own lawyer/conveyancer acts on the purchase in the ordinary way.
The Super Fund pays the deposit, stamp duty and any other associated costs, with the balance required at settlement funded by the lender. On completion, the Super Fund borrows from the Lender and charges its beneficial interest in the property to the Lender, while the Property Trustee mortgages the legal title. The Property Trustee then manages the asset the same way as any other real estate investment.
Can fund members occupy residential property?
No. If fund members or related persons occupy the property, the "in-house asset rule" will have been breached.
Can fund members occupy commercial property?
Yes. Fund members or related persons can occupy 'real business' commercial property.
Who pays what, and when?
As the beneficial owner of the property and the borrower of the loan, the Super Fund is responsible for paying all the usual amounts you would expect with an investment property purchased outside super (unless the tenant assumes responsibility): council rates, water rates and land tax (if any); interest and other loan repayments; lender's fees; repairs; property management costs; and insurance premiums.
What about land tax?
As the Super Fund is the beneficial owner of the property, land tax is payable by the Super Fund and not by the Property Trustee. The fund will only pay land tax if the total land value of properties it owns exceeds the prescribed amount. Land tax is payable in all States and Territories except the Northern Territory.
How can I sell the property?
The Super Fund can direct the Property Trustee to sell the property to any third party, subject to paying out the loan and any other amounts outstanding.
Get your structure right the first time
Talk directly with LRBA specialist Vic Bulfone about your Super Fund's purchase, or send an enquiry and we'll come back to you the same business day.