SPECIALISED PROPERTY GROUP can offer a range of investment stock to suit your particular needs and circumstances. Although we are not licensed to offer financial advice as such, we can put you in touch with professionals to take this a step further. As stated below, it may be possible to purchase via the vehicle of your self managed Super Fund - there are legal ways to maximise your SMSF position as regards borrowings to invest - again we can refer you to professionals to explain the complexities involved. This article below provides a clearer understanding. Information Relating to Borrowings by Regulated Superannuation Funds (RSF): 
For the purposes of this article we propose the RSF to be a self-managed superfund ("SMSF"). Opportunities are now available to Self-Managed Super Funds to use borrowings to purchase assets. These may include real estate to be occupied by privately-owned family businesses. Section 67 of the Superannuation Industry (Supervision) Act 1993 generally prohibits borrowings by RSFs, except in certain circumstances. One of the exceptions is contained in Section 4A, which is paraphrased as follows: A trustee of a RSF is not prohibited from borrowing money or maintaining a borrowing under an arrangement which: (a) the money is or has been applied for the acquisition of an asset that:
(i) the asset is not one that the RSF trustee is otherwise prohibited by this Act or any other law from acquiring;
(ii) is held on trust so that the RSF trustee acquires a beneficial interest in the asset;
(iii) the RSF trustee has as right to acquire legal ownership of the asset by making one or more payments after acquiring the beneficial interest in the asset; and
(iv) the rights of the lender against the RSF trustee for default are limited to rights relating to the asset;
(v) if under the arrangement the RSF trustee has a right relating to the asset, the rights of the lender against the RSF trustee for the RSF trustee's exercise of the RSF trustee's rights are limited to rights relating to the asset. Put simply, a self-managed superfund (SMSF) may borrow to acquire real estate or shares provided:
1. The asset is held by an independent trustee on behalf of the SMSF.
2. The lender can only enforce its rights against the asset acquired.
3. The lender can take a mortgage over the asset acquired by the independent trustee provided it can only be enforced against the asset secured.
4. The SMSF trustee must have the right to acquire the legal title to the asset from the independent trustee provided it can discharge the loan the independent trustee obtains to enable it to acquire the asset.
5. The balance of the funds required to acquire the asset over and above the loan funds will be supplied by the SMSF from its other resources. Typically a lender would limit its borrowings to approximately 60-70% of the value of the asset. This means the SMSF must make up the difference by providing those funds to the independent trustee.
6. Normally the lender will require the SMSF to grant a charge (security) over the beneficial right of the SMSF in the asset which is held by the independent trustee.
7. It is also possible that the lender to the independent trustee will require personal guarantees from members of the SMSF. However those personal guarantees must not extend to the interest of the member in the SMSF. This is generally the case in any event because the interest of members in a superfund are in most cases protected from creditors of members.
Care must be undertaken to implement the above plans to ensure that the Superannuation Industry (Supervision) Act is not breached. Otherwise the SMSF could be declared a noncompliant fund and lose the significant tax benefits otherwise available to it.
There are also available mechanisms for providing funds to the SMSF to make up the difference between a purchase price and the borrowings. I emphasise that the independent trustee which acquires the asset will be controlled by the members of the SMSF, and the SMSF has the right to remove and appoint the trustee of the independent trust. Normally the trustee would be a private incorporated company controlled by the members of the SMSF.
If you wish to discuss these opportunities further, Richard Smallwood of Smallwoods Lawyers of Brookvale (ph 9939 3446) will be happy to advise further. Richard Smallwood SMALLWOODS Lawyers |