Borrow from SMSF to do property development?

Discussion in 'Development' started by FXD, 14th Sep, 2019 at 4:26 PM.

Join Australia's most dynamic and respected property investment community
  1. FXD

    FXD Well-Known Member

    Joined:
    30th Aug, 2018
    Posts:
    163
    Location:
    Melbourne, Victoria
    Hi experts,

    Is there any restriction on SMSF to lend money to myself or my family trust to do property development and/or acquiring IP?

    My intention is to have SMSF serves purely as my own "bank" lending myself (or my trust) at an
    interest rate that benefits SMSF ongoingly and for the long run. Why benefit the banks ? :)

    Thanks,
    FXD
     
  2. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

    Joined:
    18th Jun, 2015
    Posts:
    22,265
    Location:
    Australia wide
    Of course there is. Breach of the sis act.
     
    ellejay likes this.
  3. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    4,060
    Location:
    Qld
    The is not the purpose of a SMSF to act as your own personal bank.

    You will be in breach of just about every regulation.
     
  4. MWI

    MWI Well-Known Member

    Joined:
    17th Jul, 2017
    Posts:
    941
    Location:
    Lower North Sydney NSW
    Just read up about SMSF and SIS Act rules. You totally miss the point!
    There are strict rules for access called 'at arms length' to limit exactly what you describe to do, SMSF is not to be used for personal reasons.
     
  5. JohnPropChat

    JohnPropChat Well-Known Member

    Joined:
    10th Sep, 2015
    Posts:
    1,722
    Location:
    Middle Earth
    If there is enough money in the SMSF why not do the development in there?
     
  6. FXD

    FXD Well-Known Member

    Joined:
    30th Aug, 2018
    Posts:
    163
    Location:
    Melbourne, Victoria
    Because:
    1. the property was bought in my own name decades ago.
    2. am only considering "lending" by SMSF of about 50% of the build costs

    Cheers,
    FXD
     
  7. JohnPropChat

    JohnPropChat Well-Known Member

    Joined:
    10th Sep, 2015
    Posts:
    1,722
    Location:
    Middle Earth
    Walk away. So many things wrong this strategy.
     
  8. MWI

    MWI Well-Known Member

    Joined:
    17th Jul, 2017
    Posts:
    941
    Location:
    Lower North Sydney NSW
    Can an SMSF lend to a party who is not a member or a relative of a member of an SMSF? The good news is it can. An SMSF can lend up to 5% of the total value of its assets to a related entity such as a related company or a related unit trust.
    Also that up to 5% has very strict rules (like to be repaid in 90 dats, etc...)
    You cannot just lend and use SMSF money for any personal benefit or gain!