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USING SUPERANNUATION FOR REAL ESTATE IN MELBOURNE

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Superannuation Property Trusts

Self managed superannuation funds have now more flexibility in being able to buy assets using borrowings, which was previously prohibited.

However to put in place borrowings for property acquisitions it is necessary to create a separate property trust that holds the mortgaged property until you discharge the mortgage.

Lenders have now put their lending criteria in place, which does not follow the normal lending criteria. Examples of some of the main differences can be:

a    Lower lending value ratio for these acquisitions;

b    Maximum loans terms may be 10 years;

c    No redraw or set-offs available, and

d    You must have the Property Trust and all legal documents in place.  

PROPERTY TRUST

Each SMSF must have trust deeds evidencing the creation of a separate trustee and property trust that will hold the mortgaged property during the period of the mortgage. The bank may require conditions necessary to protect their interest under the limited recourse loan and to ensure that the new property trustee has the power under the property trust, the original superannuation deed, and the constitution of a corporate trustee to:

Purchase a residential property from an arm’s length vendor and lease the Property to non-member or non- related parties and receive rental for business purposes, and

Purchase a non-residential property for full value from related parties, lease the property to non-member or non- related parties, and receive rental for business purposes.

HOW DOES THIS AFFECT YOU?

You need to carry out these steps:

  • You must carry out a review of the current superannuation fund trust deed to determine if it complies with the current Superannuation laws;

  • Likewise, if the superannuation trustee is a company, you must ensure the constitution not only complies with the special purposes rules under Corporations laws, but that it is in alignment with the current superannuation laws;

  • Establish a new property trust that meets the new superannuation requirements for each specific property or asset the SMSF is acquiring, and

  • Establish a new corporate trustee for the property trust.

This method may streamline current structures that have been put in place in the past to overcome some of the old prohibitions and save you time and money.

HOW CAN WE ASSIST YOU?

We can assist and advise you on these issues and determine whether your documentation is compliant and what changes or new documents you need to put in place. We can quickly prepare the legal documents that you will need such as, superannuation deeds, constitutions; superannuation property trusts, and registration of new companies that will act as the separate corporate trustee.

For an appointment, call  03 9646 0344 .

Super Funds can Borrow to buy Real Estate

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