SMSF Loans

The Homeloans Classic Self-Managed Super Fund (SMSF) product allows established Self-Managed Super Fund trustees to borrow funds for the purchase or refinance of residential investment properties.

  • Low variable rates
  • LVR up to 80%
  • Loan amount up to $500,000
  • No on-going fees
  • Principal & Interest or interest only (up to 10 years)
  • Flexible repayments
  • All the added benefits of being a Homeloans customer
Loan Base rate (variable) Comparison rate
Homeloans Classic SMSF (variable) 5.64%pa 5.84%pa

Frequently Asked Questions – SMSF

  • The minimum 20% equity for the purchase, plus costs, must come from the SMSF.
  • Where the deposit is provided to the SMSF as a loan by one or more of the members, this loan must be included in the SMSF loan servicing test. Whilst the customer should seek their own independent advice with regard to how the loan is made to the SMSF, we require the loan to the SMSF to be properly documented and that the loan be on market terms. The loan must also be fully documented as a limited recourse loan with a copy of the loan agreement provided to us for review by our solicitors and must be acceptable to them (including, without limitation, that in their opinion they do not believe that the ATO would treat the loan as a contribution). It must be clear whether the loan to the SMSF by the member(s) is secured and, if it is secured by a second mortgage over our security property, then a deed of priority would be required.
  • Where the SMSF member raises a loan to provide a loan to the SMSF for the deposit, or part thereof, Homeloans must have evidence of its source and this loan commitment must be included in the loan servicing calculation by;
    • completing a servicing test for the SMSF members, to determine ability to meet all commitments and
    • completing a servicing test for the SMSF and the member(s) to determine ability to meet all financial commitments
  • If two years’ taxation returns and financial statements cannot be provided as the SMSF has not been operating for sufficient time, the SMSF must contain rollover funds from a previously “managed” or “employer nominated” superannuation fund.
  • New / recent lump sum contributions from the member(s), in excess of annual contribution limits, that are not proceeds of a loan to the SMSF, cannot be considered due to potential taxation liability created by those contributions. Homeloans will not assess any abnormal taxation issues as part of the loan assessment (e.g. we would not accept the members making a recent contribution to the SMSF to cover the 20% equity if that contribution exceeds their annual contribution limit).
  • Yes. If the member(s) are PAYG we will use the 9.50% compulsory employer superannuation contributions in servicing. We need evidence that the employer contributions are going to the account of the SMSF and not a separate super fund.
  • A separate Assets & Liabilities page must be completed in the application form for all members (guarantors) and the SMSF
  • When the member(s) are also the trustee(s) of the SMSF, they will be the borrower(s) in their capacity as the trustee of the SMSF, as well as guarantor as an SMSF member. In a normal trust situation the trustee(s) borrow in their own right and as trustee for the trust, therefore a guarantee isn’t needed. In this situation they are borrowing in their capacity as trustee(s) only of the SMSF, therefore they need to provide a personal guarantee as an SMSF member.

Firstly, an Assets & Liabilities page must be completed for the SMSF and the members of the SMSF (the members will also be guarantors). In all cases we also require normal income evidence for the members of the SMSF to ensure they are in a financial position to meet their obligations under the guarantee.
We assess serviceability based on capacity to pay the loan repayments on this loan and any other commitments on pre-existing debts of the SMSF if, at the current assessment rate, they can be met by:

  • 100% of the rental income of the property being purchased (amount of rent used being the lesser of the valuation assessment or actual rent)
  • 9.50% compulsory employer superannuation contributions for PAYG employees
  • 100% of the rental income for other investment properties owned by the SMSF
  • Profit after tax from the super fund from avenues other than investment properties, demonstrated over two years’ financials

No – the loan is specific to the property and a new loan would have to be taken.

This question would relate to the property trust that will own the security and the answer is no, as it will not be prepared by us and will have to be prepared prior to formal approval.

Some States will only note the Trustee as the owner of the property on the Title even though it is a trust asset. Other States will allow the Trust to be on the Title.

The Property Trust/Trustee are associated with the members of the SMSF and not Homeloans. The Trust Deed will need to be prepared by the customer prior to formal approval by Homeloans.

No, unless the 20% is a loan to the superannuation fund on the terms mentioned above and we would need evidence of the source of the 20%. The equity for the purchase must come from the SMSF and, unless it is an acceptable loan to the SMSF as detailed above, the 20% amount contributed by the individuals may have implications regarding the maximum allowable contributions to super. These potential tax implication issues for a borrower will not be taken into account in our assessment and we cannot consider loans where such situations may exist.

To comply with our loan criteria, the following requirements apply:

  • The trustee of the Property Trust must be a separate entity from the SMSF trustee.
  • The Property Trust trustee must be a corporate entity.
  • The members of the SMSF can be the directors and the trustee of the Property Trust must be a single purpose entity i.e. only established to be the trustee of the property trust.
  • The member(s) of the SMSF cannot be the trustee of the Property Trust

Homeloans’ requirement is that a residential property must be leased to non-related parties for fair market value. Members of the SMSF or a relative of a member of the SMSF may not occupy residential property under our loan.

For Homeloans purposes the answer is no. All purchases under our loan must be at arm’s-length basis for full market value from an unrelated party/vendor.

No. We will only allow for finance and secure the property being purchased. If the loan is a refinance, the existing loan must have been for the property previously purchased. The maximum LVR is 70% of, the lesser of purchase price or valuation at time of approval.

No. Non-standard security types are unacceptable, including; Off-the-plan purchases and new properties that have been completed for less than 12 months are unacceptable. A “new property” is defined as being any property (including any house, unit, villa or townhouse) that has been fully completed for less than 12 months and/or has not been previously sold since construction (i.e. the vendor is a developer/builder or a related party of the developer/builder).

The SMSF must hold minimum net tangible assets of $150,000 or more prior to the loan transaction; and have a minimum liquid asset (interest/dividend earning assets) balance of 10% of the total debts of the Self-Managed Super Fund (including the loan amount) after the loan transaction is complete.

 

Disclaimer:
The requirements specified above relate to credit, product and process policies applicable to the Homeloans Self-Managed Super Fund product.
These requirements are not to be taken as financial advice and Homeloans recommends that applicants should always seek independent legal and financial advice relevant to their own personal financial circumstances, before entering into such loan agreements.

Interest rates on this site were updated on 23 March 2017. Rates shown apply to new business only and may vary before your loan is settled. Rates shown do not apply to all loan sizes, purposes, repayment types, scenarios or LVRs. Click on the loan name for more information. The comparison rate is calculated on the basis of a loan of $150,000 over a term of 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Terms & conditions, fees, charges and credit criteria apply.