Commercial Property with Borrowings

Clients of ESUPERFUND are permitted to invest in Australian Commercial Property where the SMSF borrows to fund the Property Purchase.  To simplify the Loan Application process all clients of ESUPERFUND who wish to borrow to invest in Commercial Property for their SMSF are required to use the Westpac SMSF Loan Product.  This ensures that ESUPERFUND can continue to offer its annual compliance services at a cost significantly below market. 

Loan Application Process

Once your SMSF has been established by ESUPERFUND and you wish to borrow to acquire Commercial Property for your SMSF, you can apply for an SMSF Loan using the Westpac Loan Product.  The Loan Process is detailed here.

Interest Rates and Fees

The Westpac SMSF Commercial Loan Interest Rates and Fees can be found here.  While ESUPERFUND will constantly review these Rates and Fees and update our website accordingly, you should always confirm the Interest Rate and Fees by reviewing the Westpac website or by contacting the Lender directly.

Security Custodian Trust Structure

When acquiring Commercial Property using a Loan, the Commercial Property being acquired must be purchased using a Security Custodian Trust.  This Structure is also commonly referred to an Installment Warrant Trust or Bare Trust.  When you apply for a Westpac SMSF Loan, the Lenders will arrange for the preparation of all the required documentation to establish the Security Custodian Trust.  This is included as part of the Lenders Fees.  It is important to understand that the Trustee of the Security Custodian Trust must be a Company.  If you have a Company as your SMSF Trustee this Company cannot be used as the Security Custodian Trustee.  The Company must be a completely separate Company.  Further information on this Structure can be found in our Loan Theory section here.

Separate Security Custodian Trust Structure for each Property Purchase

A separate Security Custodian Trust must be established for each Property that is acquired.  You cannot buy multiple properties using the same Security Custodian Trust Structure.  Importantly however you are permitted to use the same Security Custodian Trustee Company to act as the trustee for each Security Custodian Trust.  This saves you the cost of establishing multiple Companies.

How to Complete the Purchase Contract

When acquiring Commercial Property using a Loan, the Commercial Property must be purchased in the name of the Security Custodian Trustee Company.  The following is noted:

The Property must be purchased in the name of the Security Custodian Company.
All Directors of the Security Custodian Company must sign the Purchase Contract.
It is recommended that the Purchase Contract be signed "subject to finance".
You must not put the name of your SMSF on the Purchase Contract.

Example:

If the Security Custodian Trustee Company Name is Smith Pty Ltd then the purchaser on your Purchase Contract will be:  Smith Pty Ltd.  Neither the Trustees of your SMSF or the SMSF itself should be named on the Purchase Contract when borrowing to purchase Property in your SMSF.

Annual Compliance Fee

No additional annual fee is payable by clients who invest in Commercial Property with their SMSF, whether they borrow or not.  Our annual fee remains fixed at $699 per annum.  This is unprecedented in the marketplace who will charge additional fees upwards of $1,000 for clients who invest in property particularly with borrowings in a SMSF.

Permitted Property Types

At this time clients can only borrow to purchase Commercial Property that has already been constructed, using the Westpac SMSF Loan Product.  Clients cannot borrow to purchase Vacant Commercial Land or to subdivide Commercial Property.

Maximum Loan to Value Ratio (LVR)

The current Maximum Loan to Value Ratio on the Westpac SMSF Commercial Loan Product is as follows:

Where your SMSF Trustees are Individuals:  58.50% of the Property Value.
Where your SMSF Trustee is a Company:  65% of the Property Value.

With the Westpac Commercial Loan Product, where you require a higher Lending Ratio of up to 65%, you will need to ensure that your SMSF Trustee is a Company.  If you currently have Individual Trustees it is possible to appoint a new Company Trustee for your SMSF.  As detailed above, it is important to understand that the Trustee of the Security Custodian Trust must be a Company.  If you have a Company as your SMSF Trustee this Company cannot be used as the Security Custodian Trustee.  The Company must be a completely separate Company.  The Trustee of the Security Custodian Trust must still be a Company however. 

Lenders Mortgage Insurance

No Lenders Mortgage Insurance is payable on the Westpac SMSF Commercial Loan Product.

Maximum Loan Amount

The Maximum Loan Amount on the Westpac Commercial Loan Product is detailed here.

Accessing Information by ESUPERFUND

Data for SMSF Loans processed through Westpac will be electronically accessible by ESUPERFUND alleviating you of the responsibility of maintaining these records at financial year end.  Additional information such as Rental Income and Expenses will be tracked by ESUPERFUND through the ANZ V2 where all Income will be banked and Expenses paid in relation to the Commercial Property.  Where additional information is required we will request this from you as part of the annual Checklist Process.

Depreciation Schedule

Clients who have acquired a Commercial Property in their SMSF, particularly newer properties, are able to legally claim depreciable items including carpets, furniture, fittings and so on.  To maximize the depreciation tax claim it is advisable, but not compulsory, that you engage a Quantity Surveyor to prepare a Tax Depreciation Schedule for your SMSF relating to the Property Purchase.  A Tax Depreciation Schedule is simply a document that lists all the Properties Depreciable Items, their effective life and the dollar value you can claim against your SMSF Income.  For example for a newer property, depreciation claims may be in the thousands of dollars annually.  So for example if your annual depreciation claim was $5,000 you will save $750 in tax annually (ie $5,000 x 15%).

Avoid Audit Issues

ESUPERFUND is involved in the entire SMSF Loan Setup Process, ensuring that ALL client SMSF Loans are correctly established.  This ensures ATO compliance issues and associated penalties are eliminated and that client SMSF Loans are compliant with Super Regulations.

Product Disclosure Statement

The Product Disclosure Statement for the Westpac SMSF Commercial Loan should be carefully reviewed prior to applying for a SMSF Loan. The relevant Product Disclosure Statements can be obtained by contacting the Lender directly.

No Loan Advice Provided

ESUPERFUND (whether directly or via associated entities) is an execution only Loan Service.  That is based on a review of the SMSF Loan Products available you are satisfied that the Westpac SMSF Loan is appropriate for your SMSF.  By applying for a Westpac SMSF Commercial Loan we will assist you to obtain an approval for that selected Loan and attend to all associated paperwork.  At no time can ESUPERFUND recommend that the Westpac SMSF Loan is the appropriate Loan for your SMSF needs, objectives or circumstances.

What if use wish to use another Lender

If you purchase Commercial Property using borrowings and use a Lender other than Westpac, ESUPERFUND will be unable to act as the accountant for your SMSF.