SMSF Superannuation Investments
According to the Australian Taxation Office (ATO), self-managed superannuation funds (SMSFs) form a sizable chunk of the superannuation market. As of July 2016, over 1 million Australians were managing their own superannuation, and the number has grown year after year.
The SMSF’s investments are typically made in a mix of investments, across the 3 major asset classes: Shares, Property and Cash.
Sometimes, though, an SMSF owner wishes to invest in a real estate property but does not have enough ready funds to pay the entire price. Super funds are generally prohibited from borrowing. But there is a legally approved exception for borrowing to purchase real estate and shares called a Limited Recourse Borrowing Arrangement or LRBA.
Self-Managed Super Fund LRBAs were nearly $22 billion as of June 2016.
Limited Recourse Borrowing Arrangement
LRBAs – also known as instalment warrant loans – allow an individual to borrow within their superannuation fund to purchase an investment product.
There are strict rules about the structure of LRBAs – an SMSF that borrows money without complying with those rules will be in breach of the legislation.
An LRBA is ‘limited recourse’ because the loan structure is so set up that if the loan defaults, the lender is limited to seeking compensation only through the asset in question that is purchased using the loan, and the lender has no recourse to other assets held in the SMSF.
Making Legal Documentation Less of a Headache
An LRBA entails extensive legal documentation. Our LRBA lawyers are experts in the formal documentation process and they make setting up a limited recourse borrowing arrangement loan hassle-free.
We guide you through the whole process – from advising you about the timing and order of the transactions – very important! – to preparing all the required documentation. As these loans are usually directly linked to a real estate contract, we do all the conveyancing work too. And because you work with your accountant and your financier, so do we. We liaise with your key advisers throughout the process.
Make sure you talk to us before you sign a contract to buy something. It is vital that the steps are followed in the correct order!
Focus on Industry & Dedication to Clients
Robbins Watson brings together solicitors of extraordinary calibre with years of industry experience, technical knowledge and regional know-how. Managing an SMSF involves negotiating a complex maze of statutory and court-based laws and rulings, ensuring compliance while not losing sight of the purpose of an SMSF – investing for a secure and wealthy retirement.
Our unwavering focus on the end-result has won us many accolades from our clients, and referrals from our peers.