How to Acquire a Property using SMSF Loan in Australia

An SMSF property loan lets people borrow money from lenders to buy assets such as home or real estate property. One such benefit of investing in an SMSF loan is that it helps in generating both income and capital gain for the long term.

Home purchase using an SMSF

An SMSF is a savings account managed by individuals for their retirement instead of the one managed by a superannuation provider. To invest in an SMSF is a highly regulated process. It is suggested that the borrower seek advice from professional mortgage broker Sydney to understand the responsibilities and process correctly. This guide will help to understand how to process SMSF property loans in Australia.

SMSF property checklist for the borrower

Any Australian individual can invest in a property using an SMSF, but it would be best to brush up on investment knowledge before starting the process. This way, a borrower can approach the lender with confidence. When looking to buy a property using an SMSF, it needs to consider few rules mandated by lenders.

Deposit amount: The deposit should be 30% of property value. Every estimation related to the property needs to come out of the fund.
Proof of advice: Every lender will eventually demand verified written proof from the borrower’s accountant or financial planner, so it makes sense to keep it with supporting documents from the beginning.
Essential Payslips: Usually, the borrowers have to provide two recent payslips, ensuring the borrower’s ability to make repayments on time.
PAYG statement: It verifies the annual income which a borrower stated in his application form. Major lenders of Australia prefer the latest PAYG statements (past two years)
Super contribution history: When buying a property using SMSF, lenders want to check a minimum of 12 months’ history of the borrower’s superannuation contributions.
Benefits associated with SMSF loan

Reduce tax liability: One such good thing about SMSM property loans is that a borrower might claim any interest expenses on the loan as tax deductions by the SMSF. This strategy likely lessens the tax liability of the borrower as per the necessary tax rules and regulations.

Add value to retirement funds: Many people usually use SMSF home loans in Australia to boost their retirement savings. Due to negative gearing, it is also capable of reducing the effective tax rate.

Can utilise property income to pay off the loan: With an SMSF loan, a borrower can use income from the property to pay back the loan amount. It also allows the borrower to keep their investment separate from the other interests they might have to keep track of return in the long run.

Conclusion: A self-managed super fund (SMSF) can control borrowers’ superannuation and retirement based on their financial circumstances. It is suggested to seek financial advice from a trusted adviser.

If you considering seeking help from a Home Loan Broker in RussellLea Lea, then connect with Rajan Khatak, Director and founder at Your Finance Adviser. He has over 12 years of experience in this field and specialises in providing advice to various customers located across all types of industries in Australia.