Questions & Answers - Property

Yes. Clients of ESUPERFUND are permitted to invest in Australian Residential Property where the SMSF borrows to SMSF the Property Purchase. For more on purchasing Residential Property in your SMSF with borrowings click here.

To simplify the Loan Application process, ESUPERFUND has established direct arrangements with a number of Lenders allowing clients to easily apply for an SMSF Loan online.  ESUPERFUND has arrangements in place with the following Lenders to provide SMSF Loans for your SMSF:

-Bank of Melbourne/St George
-Commonwealth Bank
-Macquarie Bank
-Resimac Platinum
-Liberty

By using our Preferred Lenders ESUPERFUND is able to electronically access the loan transactions made by your SMSF in order to attend to the SMSF Annual Compliance Requirements. No bank records are required from you each year as we already have the data. It is important to understand that only electronic data files are provided to ESUPERFUND. In addition by using our Preferred Lenders, ESUPERFUND will ensure that all legal SMSF Loan requirements, which can be confusing and difficult to navigate, are adhered to.  It is not compulsory to use our Preferred Lenders and you are permitted to use other Lenders to purchase Residential Property if desired. 

The Macquarie Bank, Bank of Melbourne/St George, Commonwealth Bank, Resimac Platinum and Liberty SMSF Residential Loan Interest Rates and Fees can be found here. While ESUPERFUND will constantly review our panel lenders SMSF Loan Interest Rates and Fees and update our website accordingly, you should always confirm the Interest Rates and Fees by reviewing Macquarie Bank, Bank of Melbourne/St George, Commonwealth Bank, Resimac Platinum or Liberty website or by contacting the Lenders directly. 

The current Maximum Loan to Value Ratio on the Macquarie Bank SMSF Loan Product is as follows:

- Where your SMSF Trustees are Individuals: 70% of the Property Value.
- Where your SMSF Trustee is a Company: 70% of the Property Value.

The current Maximum Loan to Value Ratio on the Bank of Melbourne/St George SMSF Residential Loan Product is as follows:

- Where your SMSF Trustees are Individuals: 70% of the Property Value.
- Where your SMSF Trustee is a Company: 70% of the Property Value.

The current Maximum Loan to Value Ratio on the Commonwealth Bank SMSF Loan Product is as follows:

- Where your SMSF Trustees are Individuals: Not Applicable
- Where your SMSF Trustee is a Company: 70% of the Property Value.

The current Maximum Loan to Value Ratio on the Resimac Platinum SMSF Loan Product is as follows:

- Where your SMSF Trustees are Individuals: 70% of the Property Value.
- Where your SMSF Trustee is a Company: 70% of the Property Value.

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

- Where your SMSF Trustees are Individuals: 80% of the Property Value for established houses and townhouses or reduced LVR may apply for apartments, newly established properties or some locations.
- Where your SMSF Trustee is a Company: 80% of the Property Value for established houses and townhouses or reduced LVR may apply for apartments, newly established properties or some locations.

Yes. Clients of ESUPERFUND are permitted to invest in Australian Commercial Property where the SMSF borrows to fund the Property Purchase. For more on purchasing Commercial Property in your SMSF with borrowings click here.

No.  For client convenience and given the complexity involved with Commercial Loans ESUPERFUND offer a Broker Referral Service to source a Commercial Loan for you.  For more click here.

Once you have identified a Commercial Property that you would like to acquire with borrowings and submitted a Commercial Loan Pre-Approval with ESUPERFUND, a Loan Consultant will be in contact with you to discuss your options. Once your requirements have been assessed we will provide details of a suitable Commercial Lender for your Commercial loan requirements and in turn advise on the appropriate Rates and Fees at that time.

Once you have identified a Commercial Property that you would like to acquire with borrowings and submitted a Commercial Loan Pre-Approval with ESUPERFUND, a Loan Consultant will be in contact with you to discuss your options. Once your requirements have been assessed we will provide details of a suitable Commercial Lender for your Commercial loan requirements and in turn advise on the Maximum Loan. Typically Lenders for Commercial Property will lend up to 65.00% of the Commercial Property value.

When acquiring Residential or Commercial Property with borrowings, the Property being acquired must be purchased using a Security Custodian Trust. When you apply for a Loan with ESUPERFUND, we will arrange for the preparation of all the required documentation to establish the Security Custodian Trust. 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 Trust Trustee. The Company must be a completely separate Company. Further information on this Structure can be found in our Loan Theory section here.

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

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

• The Property must be purchased in the name of the Security Custodian Trust Trustee Company.
• All Directors of the Security Custodian Trust Trustee 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 Trust 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.

No. At this time clients can only borrow to purchase Property that has already been constructed. Clients cannot borrow to purchase Vacant Land.

It may be possible to borrow for an Off the Plan purchase where the construction will be completed at a later date. In this case you can use cash from your SMSF Transaction Bank Account to fund the deposit and once constructed the Lender will provide the balance of the purchase price. It is strongly recommended that you seek "Preapproval" before placing a deposit on the Property to ensure that the Lender will lend for the purchase.

No. At this time clients can only borrow to purchase Property that has already been constructed. Clients cannot borrow to subdivide Property.

No. Lenders Mortgage Insurance is not payable.

The Loan Process is provided in detail here.

It is not compulsory to use our Preferred Lenders and you are permitted to use other Lenders to purchase Residential Property if desired. However if you elect to arrange your own SMSF Loan with another Lender, ESUPERFUND will not be involved in the SMSF Loan Process and we will be unable to assist with the setup of the Security Custodian Trust. Accordingly you will be responsible for ensuring this structure is setup correctly and all ATO laws followed. Where you elect to use another Lender and arrange your own Security Custodian Trust structure and ATO Laws are not correctly followed, this will be your responsibility including meeting any associated penalties imposed by the ATO.

Yes. Clients of ESUPERFUND are permitted to invest in Residential Property where the SMSF does not borrow to purchase the Property. This includes investing in Residential Vacant Land. For more on purchasing Property in your SMSF with no borrowings click here.

Yes. Clients of ESUPERFUND are permitted to invest in Commercial Property where the SMSF does not borrow to purchase the Property. This includes investing in Commercial Vacant Land. For more on purchasing Commercial Property in your SMSF with no borrowings click here.

When acquiring Residential or Commercial Property with no borrowing, the Property must be purchased in the name of your SMSF. The following is noted:

• The Property must be purchased in the name of the Trustees as Trustee for the SMSF.
• All Directors of the Trustee Company or Individual Trustees must sign the Purchase Contract.
• It is recommended that the Purchase Contract be signed "subject to finance".

Example 1:

If your SMSF has Individual Trustees (eg Barney Spot and Buffy Spot) and the SMSF Name is Spotty Superannuation Fund then the purchaser on the Purchase Contract will be: Barney Spot and Buffy Spot as trustee for the Spotty Superannuation Fund. All Trustees of the SMSF must sign the Purchase Contract.

Example 2:

If your SMSF has a Company Trustee (eg Spotty Pty Ltd) and the SMSF Name is Spotty Superannuation Fund then the purchaser on the Purchase Contract will be: Spotty Pty Ltd as trustee for the Spotty Superannuation Fund. All Directors of the Company Trustee must sign the Purchase Contract.

Yes your SMSF is allowed to invest in Overseas Property.  However it is important to understand that overseas countries in most instances will not recognise the SMSF as the purchaser of the property.  This means that the property is invariably purchased by clients in their personal names with SMSF monies.  This is tantamount to a super withdrawal and using the monies to acquire the asset in the Trustees personal name.  The ATO would not accept that the owner of the asset is the SMSF in this case and where the monies accessed were preserved, the SMSF would be severely penalised for illegal access of super benefits.  Accordingly it is vitally important to ensure that the SMSF is listed as the owner of any overseas Property Investment.  If you are unsure on how to do this this you must seek external advice from a licensed financial planner.  Unfortunately ESUPERFUND will be unable to assist with purchasing Overseas Property.

The Rent from the Property Investment must be banked into the Transaction Bank Account established for your SMSF by ESUPERFUND.

The Expenses for the Property Investment must be paid from the Transaction Bank Account established for your SMSF by ESUPERFUND.

No. There are no additional compliance fees payable to ESUPERFUND by clients who invest in Residential or Commercial Property with their SMSF whether they borrow or not. Our annual fee remains at per annum. This is unprecedented in the marketplace who will charge additional fees upwards of $1,000 for clients who invest in Property in their SMSF.

Data for SMSF Loans 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 Transaction Bank Account where all Income will be banked and expenses paid in relation to the Property. Where additional information is required (such as the Property Purchase Contract) we will request this from you as part of the annual Checklist Process.

Yes. Clients who have acquired a Residential or 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 to prepare a Tax Depreciation Schedule for your SMSF relating to the Property Purchase. Please note that the Tax Depreciation Schedule must be prepared by a Quantity Surveyor. 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%).

No. This is illegal. A SMSF cannot transfer (or sell) an asset owned by a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) to the SMSF unless the transfer is specifically allowed by legislation. Residential Property is not specifically allowed to be transferred by legislation.

Yes. A SMSF cannot transfer an asset owned by a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) to the SMSF unless the transfer is specifically allowed by legislation. Business Real Property (ie property that is used wholly and exclusively in one or more businesses such as Commercial Property) is specifically allowed to be transferred from a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) to a SMSF at market value. However you will need to consider Capital Gains Tax and Stamp Duty Implications prior to making this transfer. See here for more.

No. It is expressly forbidden for a SMSF to invest in the Family Home of a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) irrespective of whether commercial rental is paid.

No. It is expressly forbidden for a SMSF to invest in a Holiday Home used periodically by a Member (or an associate of a Member including family members by blood or marriage or entities controlled by the Member) irrespective of whether commercial rental is paid.

Residential Property acquired by a SMSF must be rented out to third parties unrelated to you. This means you cannot rent a property to family including parents, siblings, children or your spouse. You can however rent the property out to unrelated friends. Commercial Property acquired by a SMSF (ie Property that is used wholly and exclusively in one or more businesses) can be rented out to any party including to you or an entity associated to you to the extent that commercial rental is paid.

Yes. There is no specific prohibition to investing 100% of your super monies in one asset class such as Property. Where such a strategy is adopted, you should clearly define why this is an appropriate strategy for your SMSF and how it conforms to the SMSF Investment Strategy. It is important to remember that risk and diversification are important considerations when implementing your SMSF Investment Strategy. A "one asset" strategy may be considered as increasing your SMSFs Risk Profile and may not be adequately diversified to mitigate Investment Risk. So while this strategy is not specifically prohibited you must carefully detail why it is appropriate for your SMSF, if it is adopted. Importantly an Investment Minute detailing the rationale for the investment and how it conforms with the SMSF Investment Strategy should be executed. Always! A Standard Investment Minute can be found here.