The Process

1. Establish Your SMSF

(a) The Trust Deed establishing the SMSF must give the Superannuation Fund Trustee
power to:
(i) purchase real estate,
(ii) borrow money, and
(iii) mortgage property to secure repayment of that borrowing.

(b) The proposed investment must comply with the requirements of the Superannuation Industry Supervision Act 1993 (SIS Act) (including the "sole purpose test - see section 62 of the SIS Act which requires that regulated superannuation funds are obtained solely for the provision of retirement benefits to members).

(c) Ensure that the investment in real property is in line with the SMSF's overall investment strategy (note that superannuation funds must have a written investment strategy), and the proposed purchase complies with all other requirements of the SIS Act (including but not limited to the "in-house asset rules" and the restrictions on acquiring assets from "related parties".

(d) It is important at this stage to verify the available equity in your SMSF as this will effect the ultimate purchase price of the property your fund can acquire. Please Contact Us to discuss this before proceeding

2. Obtain loan approval

We recommend a SMSF loan pre-approval' prior to exchanging any contracts and paying deposit monies. Red Rock Mortgages has a broad range of products specially designed to cater for SMSF borrowing arrangements.

3. Establish the Property Trust Deed

The Property Trust Deed can be established once 'pre-approval' is obtained. It is NOT required prior to applying for the loan. A simple 3 page template will be provided for your accountant or financial Advisor to 'cut & paste' the relevant information, including the security property details and trustee information.

It is important that the SMSF Trustee itself is not the Property Trustee. Such an arrangement may breach the requirements of section 67(4A) of the SIS Act and result in the SMSF being non-compliant. It is also undesirable for an individual member of the SMSF to act as Property Trustee due to trust law issues regarding the merger of the interests of the trustee and the beneficiary.

4. Contracts exchanged

When contracts are exchanged between the seller as vendor and the Property Trustee as purchaser, the deposit will be paid by the SMSF. There is no need for the deposit to be paid through the Property Trustee, although this can occur if you wish.

5. Valuation Ordered & Formal Loan Approval,

Once you have signed your purchase contract and returned to us, the lender will order a valuation and once returned and all outstanding conditions are satisfied, formal approval for your SMSF loan will be issued

6. Instructions to Solicitors/Conveyancers to issue Loan Documents

The lender will instruct their Solicitors to prepare your mortgage documents and be issued to you for signing. The SMSF borrowing structure uses normal loan and mortgage documents with special provisions to provide the limited recourse against the asset. Accordingly, the SMSF fund has its own discrete loan and provides its own discrete security.

7. Settlement

The purchase is completed. After registration of the transfer on the mortgage, the transaction/title documents will be held on behalf of the lender.