At Superannuation Warehouse, we specialise in SMSF administration. We can execute the setup of a Bare Trust structure where the Trustees have decided to purchase a property with loans. The typical structure is set out below:
SMSFs can invest in commercial or residential property; however, neither Trustees nor related parties are permitted to live in the property or use the property as a holiday house. The sole purpose of the property must be as an investment of your SMSF.
Some important points regarding SMSF propertyinvestment
An SMSF cannot normally take out loans per se. However, in order to purchase a property, an SMSF can use a Limited Recourse Borrowing Arrangement. To do this, the Trustees must provide the bank with a guarantee for the loan. You might want to use a mortgage broker to help you find the most suitable loan for your circumstances from a panel of lenders.
The cost of any repairs and maintenance undertaken on an investment property can be deducted in the SMSF. To find out more about the differences between repairs and improvements, click here and view the ATO guidelines.
Rules differ in each state, so please verify titles below with a legal professional. Generally, use the Custody Trust’s name. For example:
Land registries don’t generally accept any reference to a Custodian Trust. The transfer of land should simply be registered in the name of the Custodian Trustee, for example:
When the loan is paid off, there is no need to keep the Custodian Trust. The property will then revert back to the SMSF. There should be no stamp duty implications as there is no change in beneficial interest in the property.
For more info on how you can invest in property in your SMSF, please watch the video below.
Lastly, as the Fund purchases an investment property, there are many documents that you need to keep on your records and provide them to us when we prepare the Annual Return for your Fund. To assist you with this, please use the Checklist we provided in the link below when the Fund start to purchase the asset.