In order for a SMSF to borrow to acquire property it must establish a Security Custodian Trust Structure. The Security Custodian must be a Company. The Directors and Shareholders of the Company must be the Trustees of your SMSF (if you have Individual Trustees) or the Directors of the Company (if you have a Company as Trustee for your SMSF). If you do not have an existing Company to act as the Security Custodian Trustee (this company cannot also act as the Trustee of your SMSF), this can be done with any firm that establishes companies. A popular site used by our clients to establish a company for their SMSF is Cleardocs. The Cleardocs company establishment service can be found here.
Step 6 - Setup Security Custodian Trust
Once you have established a Company and the Company has been issued with an ACN, you can proceed to our Security Custodian online application to establish the Security Custodian Trust. This Application can be found here.
Step 7 - Sign Security Custodian Trust Documentation
Documentation to establish the Security Custodian Trust will be forwarded to you for signing. This documentation should be signed and retained until the Property has been acquired. The signed documentation should only be returned once the Property has been purchased (see below). At that time the Security Custodian Trust documentation should be returned with the Contract of Property Purchase.
Step 8 - Purchase Property
Once the Security Custodian documentation has been signed the Security Custodian Trust Structure will have been established meaning you can purchase the Property of your choice. When signing the Purchase Contract to acquire the Property please ensure the following occurs:
- 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 or the Name of the SMSF Trustees on the Purchase Contract.
Example:
If the Security Custodian 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.
Step 9 - Return Security Custodian Trustee and Property Purchase Contract Documentation
Once the Purchase Contract has been signed to acquire the Property a certified copy of the signed Purchase Contract together with the Security Custodian Trust Documentation signed at Step 7 will need to be returned to ESUPERFUND at Reply Paid 401, North Melbourne VIC 3051.
Step 10 - Stamping of the Security Custodian Trust
On receipt of the documentation ESUPERFUND will arrange the stamping of the Security Custodian Trust with the State Revenue Office if required. All documentation will in turn be reviewed and if completed correctly lodged with St George for final Loan Approval and Settlement.
Step 11 - Final Loan Approval Granted by St George Bank
Once Final Loan Approval has been granted, St George Bank will forward the Loan Offer Document and Security Documents to you for signing.
Step 12 - Loan Offer Documents to be signed and returned
The Loan Offer and Security Documents will need to be signed and returned to St George.
Step 13 - Property Settlement
At Settlement the monies to fund the Property will come from cash from the SMSF and the St George Loan being advanced. The Vendor at that time will provide a copy of the signed transfer of the Property to the Trustee of Security Custodian Trust (ie you).
Step 14 - Property Transfer and Mortgage Registration
The Property Transfer to the Trustee of the Security Custodian Trust and the mortgage are registered. This will be arranged by your solicitor or conveyancer
Step 15 - Property Rent and Expenses
After settlement the Property can be rented. The Rent must be deposited into the SMSF Bank Account. All Property Expenses including loan repayments will need to be made from the SMSF Bank Account.