Self Managed Super Funds (SMSF) Process



The general process for an eligible SMSF to borrow money to buy property is as follows:

  1. A SMSF is set up with the appropriate powers to borrow and invest in residential and/ or commercial property.

  2. If necessary, the SMSF Trust Deed of an existing fund is amended to allow the SMSF to borrow and to invest in residential and / or commercial property.

  3. The SMSF checks that the investment being considered is an appropriate and permitted investment for their superannuation fund.

  4. A Security Custodian is identified or established and a Custodian Trust deed is established.

  5. Security Custodian enters into Contract of Sale (subject to finance).

  6. SMSF applies for a loan and provides supporting documents including:
    1. Certified copy of SMSF Trust Deed,
    2. Certified copy of Custodian Trust Deed, and
    3. Evidence of ability to service (tax returns, rental estimates, etc).

  7. Certified copies of the SMSF Trust Deed and Custodian Trust Deed are forwarded by SMS to the Bank's panel solicitor to review and certify compliance.

  8. Loan Offer Document and security documents are produced and sent to customer's solicitor for execution.

  9. Customer executes and returns:
    1. Loan Offer Document
    2. Security documents signed by the SMSF Trustee as borrower and theSecurity Custodian as mortgagor.

  10. At settlement
    1. Funds to complete come from:
      1. Any deposit previously paid (from the SMSF's own funds),
      2. The SMSF's own funds, and
      3. The loan being advanced.

    2. The Vendor provides a copy of the signed transfer of the property to the Security Custodian.

  11. The transfer (to the Security Trustee / Security Custodian) and the mortgage (from the SMSF Trustee) are registered.

  12. After settlement the SMSF Trustee rents the property to an unrelated party on commercial terms.

  13. The SMSF Trustee collects the rent, pays the usual outgoings on the property and makes the loan repayments.

  14. When the loan is repaid:
    1. The mortgage is discharged,
    2. The SMSF trustee receives a transfer of property from the Security Custodian, and
    3. The SMSF Trustee becomes the registered proprietor.


Note:
All SFHLs will be referred to a Bank Panel solicitor for review of the SMSF Trust Deed and the Security Custodian Trust Deed prior to settlement.