SMSF Loans

SMSF LoansSMSF loans enable you to borrow money within your super fund.  In the investment world this is commonly known as gearing or leverage.

For a long time it was not possible to borrow within an SMSF, however changes to the SIS Act (Superannuation Industry Supervision) in the last decade have made SMSF borrowing a reality for investors throughout Australia.

There are a few extra rules surrounding SMSF loans that would not apply to normal loans or mortgage used to to purchase property.  For starters, an SMSF loans must be non-recourse, which means the lender cannot chase your super fund for additional money if you default on the loan and the asset sells for less than the loan amount.

An SMSF loan can be used for a variety of asset purchases, but in the majority of cases it is restricted to residential and commercial property.  More recent changes have also made it possible for an SMSF to borrow money to fund investment property renovations.

SMSF borrowing can be a great strategy for your retirement planning, but you need to be aware of the specific rules which govern SMSF loans.  If you fall foul of the rules you could end up with a large and unwelcome tax bill from the ATO.

For more information on SMSF loans and whether or not this strategy could work for you, we strongly recommend that you speak with a financial planner or other suitably qualified professional.

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