The best loans for buying property through your SMSF

Co-founder of the Switzer Report
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Key points

  • Despite regulatory overhangs, the super loan market is active and good deals can still be had for SMSFs looking to borrow to buy property.
  • In addition to application and monthly fees, SMSF borrowers will be up for bank legal fees, which range from $880 to $1,925, however they can go much higher.
  • If you’re looking for a variable rate loan and want to borrow less than $500,000, with an LVR under 70% and don’t need access to an offset account, it is hard to go past State Custodians. But other providers have good deals too depending on your needs, such as BOQ with its fixed rate offer.

If you’re thinking about investing in property through your SMSF, and borrowing money to do so, you may want to take action quickly. Last December, David Murray’s Financial Systems Inquiry recommended that borrowing by super funds be banned. Treasurer Hockey has said that the government would respond to this and other recommendations around this time (July).

There is considerable uncertainty as to how the government will respond. While it is generally accepted that if any ban is implemented, it will be applied prospectively rather than retrospectively, outlawing limited recourse borrowing arrangements (LBRAs) isn’t as straightforward as it seems. This is because any prohibition would also affect products like instalment warrants on shares, and impact small business owners taking advantage of the exemption that allows their SMSF to own their business premises. Further, the government has pledged that within this current term of parliament, it will not make any “unexpected detrimental change to super” – some might consider this to constitute a detrimental change.

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