Can I get a SMSF Loan for Commercial Property in Australia?

Yes, it was possible for a Self-Managed Superannuation Fund (SMSF) to obtain a loan to purchase a commercial property in Australia. However, obtaining an SMSF loan for a commercial property is subject to certain restrictions and conditions. These restrictions are imposed by the Australian Prudential Regulation Authority (APRA), Australian Securities and Investment Commission (ASIC) and the Australian Taxation Office (ATO).

Here are some key points to consider when applying for a SMSF Loan for Commercial Property:

  1. Sole Purpose Test: The SMSF must comply with the sole purpose test, which means the primary purpose of the fund should be to provide retirement benefits to its members. Investing in commercial property should align with this purpose.
  2. Limited Recourse Borrowing Arrangement (LRBA): If you want to borrow to purchase a commercial property through your SMSF, you must use a specific borrowing arrangement called an LRBA. Under an LRBA, the lender only has limited recourse to the SMSF’s assets in the event of loan default. This helps protect the other assets in the SMSF from being used to repay the loan.
  3. Loan Criteria: Lenders typically have specific criteria for providing SMSF loans for commercial properties. These criteria may include the SMSF’s financial position, the property’s type and location, the financial history of the members, and the overall viability of the investment.
  4. Deposit Requirements: Lenders often require a higher deposit for SMSF loans compared to regular residential property loans. It’s common for lenders to require a deposit of between 20% > 30% or more of the property’s purchase price.
  5. SMSF Trust Deed: The SMSF’s trust deed must permit the use of borrowed funds to invest in property. If it doesn’t, the deed may need to be updated to accommodate this type of investment.
  6. Compliance: SMSFs are subject to strict compliance rules and regulations. Trustees must ensure that all activities, including the purchase and management of the commercial property, comply with the superannuation laws and regulations.

In Conclusion:

Since regulations and lending practices can change I recommend consulting with a financial advisor or a mortgage broker who is experienced in SMSF lending and can provide up-to-date information and guidance tailored to your specific circumstances. This will ensure that you are fully informed about the current rules and requirements for obtaining an SMSF loan to purchase a commercial property in Australia.