SMSF Loans
A self-managed super fund (SMSF) is a type of retirement fund run by the members themselves. An SMSF allows members to have greater control over their retirement savings and investment strategies. One way that SMSF members can invest is through SMSF loans.
An SMSF loan is a type of loan that allows an SMSF to borrow money to invest in property or other assets. The loan is made to the SMSF, not the individual members, and the SMSF is responsible for repaying the loan.
Why an SMSF Loan?
There are several reasons why an SMSF loan may be a good option for investors.
- Diversification: An SMSF loan allows SMSF members to use their retirement savings to invest in property or other assets that they may not have been able to afford otherwise. This provides a greater level of diversification and potentially higher returns than traditional investment options.
- Tax benefits: Interest payments on the loan are tax-deductible for the SMSF, and if the asset purchased using the loan generates income, that income is taxed at the concessional superannuation tax rate.
- Control over the investment strategy: SMSF loans provide a greater level of control over the investment strategy. SMSF members can choose the asset they wish to invest in and the terms of the loan.
Types of SMSF Loans
- Limited recourse borrowing arrangements (LRBAs): With an LRBA, the SMSF borrows money to purchase an asset, such as property. The loan is secured by the asset, which means that if the SMSF defaults, the lender can only recover the asset and not other assets held in the SMSF.
- Non-recourse loans: With a non-recourse loan, the lender can only recover the asset if the SMSF defaults.