Self Managed Superannuation Fund Lending

Your Self Managed Super Fund Can Now Invest In Real Estate

If you have a self-managed Super Fund then we have some good news for you. Your self-managed Super can now borrow money to buy real estate.

Since September 2007 self-managed Super Funds have been allowed to borrow and charge their assets as long as a special structure is in place.

This gives investors the same flexibility to invest in real estate inside their Super Fund as they've enjoyed outside it.

However there are some essential steps your fund will have to take:

• The trust deed establishing your super fund must give the Superannuation Fund Trustee the power to buy real estate, borrow money and mortgage property
• Your investment must comply with the Superannuation Industry Supervision Act Including the sole purpose test, which ensures the Super Funds are obtained just for its member's retirement benefit
• Your fund must have a written investment strategy to keep its real estate investment consistent with its overall strategy

A property trust deed must be established. This essential document can help determine if there are adverse GST, tax or stamp duty consequences.

The trustee company should not be associated with the investor or their fund.

Purchasing the Property

Purchasing a property for your Trust is the same as purchasing any other property, but residential property must be purchased from an "arms length" vendor. While non-residential property can be bought for full value from related parties it must be let for commercial purposes only.

The fund applies for the loan to purchase the property and its nominated solicitor or conveyancer acts on its behalf. It must be purchased in the name of the Property Trustee, which should be at "arms length" from the fund trustee and the members of the fund.

The fund pays the deposit, purchase costs and stamp duty

When settlement occurs the Property Trustee mortgages the property to the lender - the property is owned by the Property Trustee and the beneficiary is the fund. The fund then manages the property as it would any real estate investment.

If you have any questions about how your self-managed Super Fund can borrow to invest in real estate contact us today.