Lending to Self Managed Super Funds
At Blue Key Finance we know how important it is for you to understand the ins and outs of SMSF restrictions, interest rates, product features, and servicing requirement.
Benefits
- Members of a SMSF pay just 15% in tax on the taxable income in their SMSFs, vs. up to 49% when investing in their own name
- Because SMSFs only pay tax at 15%, any loss as a result of negative gearing only has a 15% tax benefit, therefore, only becomes a more attractive option when the property is positively geared
- In the event of bankruptcy or litigation, your benefits in a SMSF are protected, even if you withdraw some of this to live on
- There’s less tax on rental income
- Capital repayments on loans can be sped up by increasing the amount of contributions going into the SMSF
SMSF restrictions
- Maximum ‘loan to value ratio’ (LVR) 80% for established residential properties or 70% if off-the-plan and equal or lower for commercial properties
- Maximum 30 year loan term and 15 years for commercial property
- Property purchase for investment purposes only
- You cannot make personal loans to fund members or to your relatives
- You cannot buy a residential property from a fund member
- You cannot allow a member or relative to live in property owned by the SMSF
- No construction or purchase of vacant land
- No top ups, redraws, or capitalisation of interest
Interest rate
- Standard variable rate or standard fixed rates (with a slight interest rate loading)
- May have an initial interest only period
Product features
- No redraw available
- No capitalisation / funding of loan interest
- No security substitution
- No limit increases
Servicing of loan
- Contributions from members via their employer or from themselves
- Proposed net rental income from the investment purchase
- Income from other investments held within the SMSF (less any assets redirected to property acquisition)
We strongly recommend that you receive the appropriate investment, tax and legal advice prior to implementing any strategy.
Click on the below link to obtain a one page overview of key statistics around Self managed super funds:
SMSF annual statistics
