Super SUPER — Lending to Your Personal Super Fund

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Lend-to-Super

ARE YOU THINKING about borrowing to buy property or other assets via a Self-Managed Superannuation Fund (SMSF)?

If so, you may be wondering whether you need a bank to lend directly to your SMSF; or if there is a simpler and cheaper way to borrow?

Super SUPER’s Answer

Practically anyone can lend to an SMSF using equity from another property, cash from term deposits, funds trapped in a family trust (or other corporate structures), or even from a family member or friend.

Super SUPER, which is a joint initiative of CIA tax and First Option Credit Union, is here to simplify that process.

Super SUPER enables you to purchase properties (or other assets) combined with your SMSF — thereby accelerating your tax concessions and providing ultimate cash-flow flexibility. And it is also coupled with much lower set-up and ongoing costs, simplified legal documentation … making the whole process fast and efficient.

Here are some Common Questions

I’ve heard you can borrow to buy property with your super.

Is there an alternative to borrowing money from the bank to on-lend to super? Is there a cheaper and better way? Can I be the lender? In other words, if there is equity in my home can I use some of that equity to lend to my superfund?

The answer is YES … as long as you have documented it and are charging a commercial interest rate. In other words: You need to act as if you were at arms-length. Then, this simple strategy is often a much easier, cheaper and efficient way to lend.

Want to Know More on Borrowing with your Super?

Here is an Extract from: www.financialdistraction.com.au

As a tax advisors, we see a lot of resistance to the idea of contributing more than legally required to superannuation. This is because many people don’t like managed superannuation funds (usually due to fee structures, poor performance, and the ongoing fees paid to financial planners).

For these people, running a self-managed superannuation fund (SMSF) is often the answer. Because, sometimes it can be difficult to show the tax benefits from having $200,000 or more in a commercial fund.

In these cases, it is often much easier to show the tax savings using an alternative: Investing $200,000 or more into their own SMSF, which perhaps buys a small factory; and then, rents it back to either the investor’s business or someone else’s. (And it’s the same strategy for residential property, except you can’t rent it back to yourself or an associate).

Bottom Line: SMSFs provide investors with the ability to make their own investment decisions.

And from September 2007, the ability for your SMSF to borrow money also became a reality through the prudent use of easily constructed instalment warrants, which is a form of derivative.

Let’s look at a quick example …

You put $200,000 into your own SMSF, which borrow a further $200,000 through an instalment trust structure.

You then buy a factory that your SMSF rents back to either your (the superannuant’s) business or someone else’s. ?From there, a positive cash flow and your 9.5% payroll contributions (plus any additional salary sacrifice) can all help to pay down the loan very quickly.

It sounds almost too good to be true … but it really is a good, tax-effective approach!

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