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  • Matt Heighway

Buying Property with a Loan in Your SMSF – Who You Need on Your Team

If you are one of the more than 10% of SMSF’s who have an LRBA or you are currently considering one, then better understanding them and who you need on your team to help manage them can be useful to keeping them compliant.

An LRBA is a separate legal structure whereby an SMSF can utilise leverage to increase its investment base. A popular strategy among the many SMSFs with LRBA’s is to purchase their business premises by using their existing super together with borrowings.

As a favoured investment among Australians, residential property purchases via LRBA’s are also popular.

With property being illiquid, many SMSFs take a buy and hold approach, so it is typical for LRBA structures to be in place for many years. Let us introduce you to the professionals you may have on your LRBA team during its lifecycle.

LRBA Professional Team

LRBA Adviser

If you choose to engage with an experienced LRBA adviser instead of going it alone, you will often find that they can take care of bringing together the other members you need on your LRBA team. If instead you opt for digital advice or you engage an adviser just for the set up advice then finding the rest of your LRBA team will be up to you.

Either way, obtaining the advice upfront will help you understand the complexities of the structure and how it needs to be maintained whilst it is in place.

Specialist SMSF Lawyer to provide LRBA related documents

It usually works best to have LRBA documents ready for signing ahead of finding a property so that everything happens in a compliant way and you don’t end up with adverse stamp duty outcomes.

In most cases, the financier’s lawyers will scrutinise the LRBA documents so sourcing them from a lawyer rather than off the shelf, means it is easier to direct any questions the financier may have directly to the lawyer. Delays with property purchases can result in interest being paid or in the worst case scenario the purchase falling through.

As well as documenting the LRBA establishment, the lawyer can advise on stamp duty matters, provide lease agreements, loan agreement and vesting documents, meaning you have access to a service that caters for all legal aspects relating to the LRBA.

They may even be able to provide the property conveyancing service or work with the conveyancer so they have oversight over that aspect of your property purchase too.

LRBA Loan capability or Referral option including refinancing

Major bank lenders exited from the LRBA market several years ago so an experienced LRBA broker can help you access second tier lenders. Alternatively, you might access a lending service via a digital advice platform.

For related party loans, you are best placed to utilise a specialist lawyer who can ensure that the safe-habour requirements are properly dealt with.

Buyers Agent Referral option

Having a relationship with a Buyers Agent can help you find the property that is right for you. The Buyers Agent is engaged to understand what you are wanting to achieve from your property purchase, analyse the property market, find you a suitable property and negotiate the purchase.

Market Valuation Report service

You will need a market valuation report before you buy the property if it is a business real property you are buying from yourself. An SMSF is required to transact on an arms-length basis and the report is used to properly substantiate that the purchase price complies with this requirement.

Each year your SMSF is required to revalue any property held so that it is recorded at market value in the Financial Statements.

The real estate agent managing your property may provide a valuation for you and if you go with the option be sure to ask them to include comparable sales. In some cases, SMSF Administrators or Auditors offer this as a complementary service.

Tax Depreciation Report provider

A tax depreciation expert can appraise your property to determine if it makes sense to generate a tax depreciation report. These reports can provide valuable deductions to your SMSF.

There are many providers available offering this service to choose from.

SMSF Administration Service

There’s a lot of paperwork involved in owning a property so using an SMSF Administrator who actively streamlines this for you can save you lots of time.

Trustee Education Service

LRBA’s are not simple so it is worth taking the time to understand them and the annual tasks that need to be attended to in order to keep your SMSF compliant each year. Some LRBA related products you may want to utilise are as follows:

At Lifetime SMSF we are passionate about your retirement. We know that the journey to retirement determines the quality of your retirement outcomes and we help Australians maximise these outcomes through Best Practice SMSF practices that encourage seamless and simple ongoing management of your SMSF. With over 4o years experience in the SMSF Industry we deliver industry best SMSF Accounting, Taxation and technical support services to Australians that want the best for their SMSF journey and retirement. With hand picked industry partners we assure our clients that their growth and protection are our only focus. Get your SMSF Accoutning in order here

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