Residential Property with Borrowings
Clients of ESUPERFUND are permitted to invest in Australian Residential Property where the SMSF borrows to purchase the Property. 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.
Panel of Lenders
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
By using our Permitted 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 Permitted Lenders, ESUPERFUND will ensure that all legal SMSF Loan requirements, which can be confusing and difficult to navigate, are adhered to.
Loan Application Process
Once your SMSF has been established by ESUPERFUND and you wish to borrow to acquire Residential Property for your SMSF, you can apply for an SMSF Loan using our panel lenders via the Client Portal. The Loan Process is detailed here.
Loan Refinance Process
To the extent that you wish to refinance your existing SMSF loan to another lender (fees may apply), you may submit an application via the Client Portal once you have chosen a lender. The Interest Rates for each Permitted Lender can be found here.
Interest Rates and Fees
The Interest Rates for each Permitted Lender 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 the relevant Lenders website or by contacting the Lenders directly.
Permitted Property Types
At this time clients can only borrow to purchase Residential Property that has already been constructed. You may purchase an Off the Plan property with borrowings via your SMSF (subject to lender's credit criteria and limited Loan to Value Ratio and postcode restrictions may apply) however please note that the loan cannot be Formally Approved until title details and a Certificate of Occupancy/Classification are available (i.e. the property has been finished). It is strongly recommended that an extension of the standard two week settlement period (after property completion) is sought to avoid late settlement penalties. The investor bares the risk that the property may not be acceptable to the lender when purchasing Off the Plan Properties.
We strongly recommend that clients are granted loan pre-approval prior to contracting to purchase property via SMSF to ensure that the application meets the lenders lending criteria prior to committing to the purchase and to gain a more thorough understanding of the complexities involved in the SMSF borrowing process.
Lenders Mortgage Insurance
Lenders Mortgage Insurance is not payable on SMSF Loans taken out with any of our Permitted Lenders.
Maximum Loan to Value Ratio (LVR)
The current Maximum Loan to Value Ratio for each Permitted Lender can be found here.
Maximum Loan Amount
The Maximum Loan Amount for each Permitted Lender can be found here.
Minimum Loan Amount
The Minimum Loan Amount for each Permitted Lender can be found here.
Accessing Information by ESUPERFUND
Data for SMSF Residential Loans processed through our Permitted Lenders 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 we will request this from you as part of the annual Checklist Process.
Clients who have acquired a Residential 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%). For further information on obtaining a depreciation schedule for your property click here.
Avoid Audit Issues
By having ESUPERFUND involved in the entire SMSF Loan Setup Process, you can be assured that all SMSF Loan requirements are adhered to. This ensures ATO compliance issues and associated penalties are eliminated and that client SMSF Loans are compliant with Super Laws.
Product Disclosure Statement
The Product Disclosure Statement for our Permitted Lenders 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 Lender is appropriate for your SMSF. By applying for an SMSF Loan using our Loan Service, we will assist you to obtain an approval for that selected Loan and attend to all associated paperwork. At no time does ESUPERFUND recommend that the selected Lender is the appropriate for your SMSF needs, objectives or circumstances.
Security Custodian Trust / Bare Trust Structure
When acquiring Residential Property using a Loan, the Residential Property being acquired must be purchased under a Security Custodian Trust. This Structure is also commonly referred to an Instalment Warrant Trust or Bare Trust. When you apply for a loan with our Permitted Panel of Lenders via 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
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 Trust 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 Residential Property using a Loan, the Residential 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 if you are borrowing to purchase the Residential Property.
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.
Security Custodian Trust Setup Process and Fee
As detailed above a Security Custodian Trust must be established for each Property that is acquired using borrowings. ESUPERFUND will arrange the setup of the Security Custodian Trust for you when you borrow to buy Residential Property for your SMSF. ESUPERFUND has a one off fee of $500 to setup the Security Custodian Trust. The Security Custodian Trust must be setup only after the Loan has been approved. To apply for a Security Custodian Trust with ESUPERFUND you will need to login to your Client Portal and apply online here.
Security Custodian Trust Company Trustee Setup Process and Fee
As detailed above a Security Custodian Trust must be established for each Property that is acquired with borrowings. The Trustee of the Security Custodian Trust must be a Company. If you do not have an existing Company, ESUPERFUND offers a Company Setup Service. The cost of establishing a Company with ESUPERFUND is . In addition there is an additional annual ASIC Fee of payable directly to ASIC. Please note that you are not obligated to use the ESUPERFUND Company Setup Service and can arrange to setup a Company with any provider desired. The Company details can in turn be provided to ESUPERFUND when setting up the Security Custodian Trust. The Company that will act as Trustee of the Security Custodian Trust can be setup after the Loan has been approved but must be setup before the Property has been acquired (ie the Purchase Contract signed) as the Company will appear on the Purchase Contract. To apply for a Company with ESUPERFUND you will need to login to your Client Portal and apply online here.
Can your SMSF use other Lenders?
No. ESUPERFUND Clients are not permitted to use Lenders to purchase Residential Property other than our Permitted Lenders.