Once you have decided to borrow to acquire a Residential Property using borrowings you will need to follow the process detailed below:
Setup your SMSF
Prior to even considering purchasing a Residential Property you must first establish your SMSF. The process to setup a SMSF is detailed here. It is important to note that when you establish a SMSF you have a choice of whether to appoint Individual Trustees or a Company Trustee to act for your SMSF. Each option is detailed here. For your convenience, if you elect to have a Company as the Trustee of your SMSF and do not have an existing Company, ESUPERFUND offers a Company Setup Service. The cost of establishing a Company with ESUPERFUND is .
It is important to note that certain Lenders will only lend to SMSFs established with a Company Trustee. In relation to our Panel of Lenders, only the Commonwealth Bank requires the Trustee of the SMSF to be a Company. Our other Lenders, namely St George, Bank of Melbourne, Macquarie Bank, Resimac and Liberty will still lend to your SMSF even if you have Individual Trustees. As detailed at Step 5 below, it is important to note that if you elect to have a Company to act as a Trustee of your SMSF this Company cannot be used as the Trustee of the Security Custodian Trust. A separate Company must be used as the Trustee of the Security Custodian Trust.
Rollover your Super Benefit and Contribute to the SMSF
Once the SMSF has been established you will need to Rollover your Super Benefit and commence making Contributions to your SMSF. The process to Rollover your SMSF Benefit is detailed here.
Apply for Loan Pre Approval
To determine whether you are likely to qualify for a Loan you will need to apply for Loan Pre Approval by requesting a prepopulated Application form from ESUPERFUND. The request for a Pre Approval Application must be done using the ESUPERFUND Loan Pre Approval Application here. It is advisable that the Loan Pre Approval is requested to ensure that you will not be liable for unnecessary application fees and Security Custodian Trust fees in the event that the Loan Application is rejected later.
Sign and return Loan Pre Approval Documentation
On lodging a Loan Pre Approval Application online, a prepopulated Loan Application will be mailed to you for completion and signing. The documentation must be returned to our office for review and lodgement with the relevant Lender for Pre Approval.
Setup Company to act as Trustee for the Security Custodian Trust
In order for a SMSF to borrow to acquire property it must establish a Security Custodian Trust Structure. The Trustee of the Security Custodian Trust must be a Company. The Directors and Shareholders of the Security Custodian Trust Company Trustee 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). For your convenience, 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 approximately 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 (see next step for more). 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). To apply for a Company with ESUPERFUND you will need to login to your Client Portal and apply online here. It is important to note that if you have a Company that acts as a Trustee of your SMSF this Company cannot be used as the Trustee of the Security Custodian Trust. A separate Company must be used as the Trustee of the Security Custodian Trust.
Setup Security Custodian Trust
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 utilising our in-house broking service. 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.
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.
Once the Security Custodian Trust 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 Trust Trustee Company.
-All Directors of the 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.
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.
Return Security Custodian Trust 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.
Stamping the Security Custodian Trust
On receipt of the documentation, you will need to arrange the stamping of the Security Custodian Trust with the State Revenue Office if required. ESUPERFUND will advise you on the process to do this at the relevant time.
Final Loan Approval Granted by Lender
Once Final Loan Approval has been granted, the Lender will forward the Loan Offer Document to you for signing.
Loan Offer Documents to be signed and returned
The Loan Offer Documents will need to be signed and returned to the Lender.
At Settlement the monies to fund the Property will come from cash from the SMSF and the Loan being advanced. The Vendor at that time will provide a copy of the signed transfer of the Property to the Trustee of the Security Custodian Trust.
Property Transfer and Mortgage Registration
The Property Transfer to the Security Custodian Trust Trustee Company and the mortgage are registered. This will be arranged by your solicitor or conveyancer.
Property Rent and Expenses
After settlement the Property can be rented. The Rent must be deposited into the Transaction Bank Account. All Property Expenses including loan repayments will need to be made from the Transaction Bank Account.