Lending to a SMSF

Discussion in 'Loans & Mortgage Brokers' started by MBowen, 13th Sep, 2016.

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  1. MBowen

    MBowen Active Member

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    Hi everybody. I'm looking at buying a property outright with my SMSF, unfortunately I'm about 10k short of having enough. Apparently I can lend to my SMSF and it pays me back as long as the interest rate is reasonable and it is Principal and interest. Is this true? How would I organise it through an accountant?
     
    MBowen, 13th Sep, 2016
    #1
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes

    But it is going to be very expensive to set up for such a small amount.

    You need to see a lawyer for the loan set up, but see a financial planner for some other strategies.
     
    Terry_w, 13th Sep, 2016
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  3. Foxdan

    Foxdan Well-Known Member

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    If you have enough money in your SMSF to buy a property outright, why not use it for several large deposits and loan the remainder? With large deposits, you would potentially have multiple cash flow positive properties. Set it up and let it look after itself til your retire.
    Use leverage instead of using all your SMSF cash on one property.
     
    Foxdan, 13th Sep, 2016
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  4. JacM

    JacM VIC Buyer's Agent - Melbourne, Geelong, Ballarat Business Member

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    Hi @MBowen

    If your SMSF is only $10k short, wouldn't it just be easier to make a non-concessional (ie after tax) contribution? In other words, wouldn't it just be easier to donate $10k into the SMSF ? Alternatively, if you haven't found the precise property, perhaps doing some rapid extra salary sacrificing in via concessional contributions, being aware of the cap limits. Contribution caps | Australian Taxation Office
     
    JacM, 13th Sep, 2016
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  5. Corey Batt

    Corey Batt Well-Known Member

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    That's where my line of thought is too - no point spending effectively 50% of the 'borrowed' amount in fees when you could do a contribution. Get some specific advice for your exact numbers, but it wouldn't surprise me at all if it's a lot more effective use of your funds.

    Be very very careful with committing all your cash funds within the SMSF to the one asset, there's no going back from this via equity release so it may be more prudent to gear on the asset and open up the potential to get into multiple purchases/other asset classes, depending on your age, objectives etc.
     
    Corey Batt, 13th Sep, 2016
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  6. Redwood

    Redwood Well-Known Member

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    G'day

    Best way will be a contribution wither concessional or non concessional. If you are purchasing with cash outright and not under a LRBA - a related party loan will not work.

    Cheers Ivan
     
    Redwood, 22nd Nov, 2016
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