SMSF Loans

There is a general prohibition on SMSF to borrow money or maintain a borrowing. This is as per the SIS Act Section 67 (a). However, there are a few limited circumstances where an SMSF can obtain a loan, these are:

• Limited Recourse SMSF Borrowing Arrangement (Bank Loan)
• Related Party Loan

As with every investment that the SMSF purchases, the SMSF must have a legal enforceable right over the asset. When an SMSF uses a loan to purchase an asset, a Bare Trust must be executed in order for the SMSF to legally control the asset and in some cases a Custodian Trustees is requested/necessary.

Investing by using a loan is not as straightforward as investing outside the retail superannuation environment. There are many rulings and restrictions which may make the task daunting for many new to the SMSF scene. However, at Superannuation Warehouse we are quite familiar with legislation and ruling around loans and can assist Trustees to ensure that their Fund stays compliant with the rulings when accessing the benefits of a loan.

For more information about loans in an SMSF, please see the ATO video below: