Releasing Equity in an SMSF Property

Hi -

The context of this scenario below is completely within an SMSF.

If I have an investment property that is currently 30% LVR, and then decide to refinance to 80% LVR using a lender who provides an offset account, and ask the new lender to deposit the excess funds in the offset account, would I be able to then use these excess funds as a deposit for a new property / loan?

Thanks,

Robert

 

Hi Robert,

SMSF refinance needs to be dollar for dollar. The investment property you are eluding to - is that property in the SMSF? There is a ATO ruling that deals with refi - and the new lenders lawyers will review the arrangement in accordance with Super Law.

Cheers, Ivan

 

Thanks Ivan - yes the property would be in an SMSF.

I will have a read-up on the ATO ruling. Interesting that refinance has to be dollar for dollar.

I will be reviewing my lawyer later this week; but thought I would see if others have had experience in this area.

 

Not a chance - the rules specifically state that you cannot release equity on a SMSF property.

This is where offset accounts/redraw/interest only become incredibly important if you're looking to leverage up in the future within the fund.

 

Agree offset accounts are incredibly important, and they provide a way of accessing equity. However, it seems redraw accounts are considerably less flexible. With redraw, it seems you can only use the funds against the property the loan is associated with, and furthermore they can not be used for material renovations (general property improvements are OK). So if you do put cash into the loan, then using it later on via redraw has strict rules.

 

Always an option .... not preferable.... but definately an option...

 

Sis act prohibits this.

 

It may be seriously worth considering whether to sell and buy a replacement property and highly gear it.

 

Thanks Terry.

Sorry... that is what I meant when I said sell the property i.e not to buy back the property, but to purchase a completely new property.