Buy property through your SMSF or switch from an existing high-interest loan by refinancing.
Support your retirement through rental income and ongoing property appreciation.
Invest in standard commercial real estate like offices and retail, or acquire specialised properties like service stations.
Switch from a high-interest grandfathered loan to one that helps you save more for retirement.
When was the last time you checked the interest rate on your SMSF mortgage?
If you’re like many SMSF borrowers, you’re probably paying more than you need to.
The Big Four and most other first-tier banks don’t offer SMSF refinancing, which might mean your interest rate has slowly been creeping up year after year.
But you do have options.
With more than 9 specialised SMSF lenders on our panel, our lending strategists can help you refinance to a loan with a lower interest rate.
That means better cash flow for your SMSF – and more funding for your post-retirement lifestyle.
Schedule a free 30-minute consultation to find out how we can help.
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Following the Royal Commission into banking, most banks stopped issuing SMSF loans.
Existing customers continued to have their loans supported – but, with no competition in the market and no way to refinance, their interest rates kept rising.
In some cases, these ‘grandfathered’ loans reached rates upwards of 9% per annum.
Today, 16 bank and non-bank lenders offer new SMSF loans and refinancing, giving customers a pathway to more affordable rates.
Think you might be paying too much in repayments on your SMSF loan?
Talk to one of our lending strategists about your options.
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SMSF loan refinancing is like refinancing a standard loan – with a few extra requirements.
You, your broker, and your SMSF adviser will need to make sure that your new loan falls under the same limited recourse borrowing arrangement (LRBA) as your original loan.
You also won’t be able to borrow more than your original loan or leverage your equity to do things like renovate your property.
Finally, you’ll also need your broker’s help to find a lender that offers SMSF refinancing.
Most first-tier lenders don’t, and even some SMSF lenders might be wary about refinancing commercial properties classed as ‘specialised securities’.
Schedule a free consultation to find out more about how we can help.
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Owning a home has long been a cherished dream for many Australians. However, the soaring real estate prices in major cities have made this aspiration seem unattainable for first-time homebuyers. In response to this challenge, the Australian government has introduced several First Home Buyer Schemes to assist prospective homeowners in
Exactly how much you can save by switching to a new lender depends on your personal circumstances.
Here’s an example. If your SMSF held a $400,000 mortgage on an $800,000 residential property at 9.5% p.a. with a 25-year term, and you refinanced to 6.9% p.a., you would save $520 per month (excluding fees). Over five years, that’s $31,200 in savings – money that your fund could invest to support your retirement.
You can use our calculator or talk to one of our lending strategists for more information about how much you could save.
Any asset acquired by your SMSF must meet the sole purpose test – that is, your investment can only be made for the sole purpose of supporting your and other fund members’ retirements. You, your friends, and your family (‘related entities’) can’t benefit financially from a property that your SMSF acquires. It’s why you can’t live in a residential property owned by your SMSF – or rent it to, buy it from, or sell it to people you know.
But there are exceptions to the sole purpose test. When a property is used wholly or exclusively in one or more businesses (‘the business use test’), it can be purchased from, sold to, or leased to a related entity. The main requirement: any transactions must occur at ‘arm’s length’ – that is, under the same terms that would be reasonable if you and the lessee/buyer/seller didn’t know each other.
If you own a business, you may be able to acquire your business premises and lease them to your business on arm’s length terms – which means your business’s rent is paid into your SMSF and taxed at a concessional rate. (You must have an enforceable lease agreement in place between your SMSF and the business in question.)
The other exception to the sole purpose test is for a property that is used in one or more primary production businesses. That property won’t fail the business use test on the basis of both of the below being true:
Keep in mind that the above information is general and purely informational in nature. It is not super, tax or financial advice and should not be interpreted or used as such. For personalised advice, contact our team for a referral to an accredited super or financial adviser.
Following the Banking Royal Commission of 2017–19, most first-tier lenders – including the Big Four – exited the SMSF lending space.
SMSF loans were already relatively risky for lenders. Because an SMSF can only acquire a property under an LRBA, that property must be held in a separate trust – which means, if the SMSF is unable to meet its loan obligations, the lender has ‘limited recourse’ and is only able to recoup losses from the asset held in that trust. (Some SMSF properties are also specialised securities, which creates an additional layer of risk for lenders.)
The Royal Commission placed increased scrutiny on lenders’ compliance with relevant laws, and, as a result, almost all first-tier lenders decided that issuing new SMSF loans was no longer commercially viable.
Since 2019, though, various second- and third-tier lenders have begun offering SMSF loans again. A lower compliance burden means that those lenders have a greater appetite for SMSF lending, including the refinancing of existing loans that were ‘grandfathered’ when first-tier lenders exited the space.
You can read more about the history of SMSF loans here.
No, you can’t. Section 67A of the Superannuation Industry (Supervision) Act 1993 (Cth) is clear that, while you can refinance an SMSF mortgage, you can only refinance the amount you borrowed plus interest and expenses (such as stamp duty and conveyancing fees). For example, if your fund borrowed 70% of a property’s value, it couldn’t refinance to borrow 80%.
You also can’t accrue equity and then leverage that equity to do things like put down a deposit on a new property or improve your asset. Limited recourse borrowing arrangements (LRBAs), which are the vehicles through which SMSFs can borrow money, can only be established in relation to single acquirable assets. (Acquirable assets are defined in the legislation, but don’t include property improvements.) One LRBA can borrow money for one property – that’s all.
Keep in mind that SMSF refinancing is legally complex with lots of grey areas. For advice specific to your situation, contact us for a referral to an appropriately qualified financial or SMSF adviser.
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