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#1 2016-08-30 01:32:40

BuggedOut
Member
From: New South Wales
Registered: 2015-07-21
Posts: 1,797
Trades :   39 

Loaning from SMSF

Was just wondering if it is possible to set up a SMSF and then arrange a loan (eg, mortgage, margin loan, personal loan) from the SMSF to a family member, or even to yourself?

Seems to me that SMSF gives flexibility to invest in different investments, so is there any real difference in using super to buy junk bonds....or granting a personal loan to an individual at a fixed rate of interest?

Obviously the loan would need to be documented and perhaps there would need to be a "fair market rate" for interest charged, but perhaps this is another way that super equity can be accessed without necessarily needing to use a bank (in other words - keep it out of the financial system).  Interest paid on the loan would effectively be a tax free way of making further contributions to your super??

Can anyone help out with advice on this?  Has anyone tried it?

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#2 2016-08-30 01:58:32

Ipv6Ready
Silver Stacker
From: North Sydney
Registered: 2016-01-08
Posts: 2,261
Trades :   39 

Re: Loaning from SMSF

I have heard there is a loop hole in loaning out to family members etc I think it was called Related Parties.
But if is restricted to 5% of the fund and it has to be an entity etc.

It is one of the most audited part of the ATO and the crunch was if you lend to a relative and they default, unlike if it is your money, where you can decide to kiss it goodbye because you understand the situation, they tried hard etc and you dont want to make it worse, IN SMSF that is not possible. You need to sue for the money officially and potentially bankrupt your relative. Not an easy situation to be in… remember it is your money … but not yet.


WTB 4 to 6 grams of pure gold. Don't care if it is coin, bar or granules. Near spot, suits anyone who has been tempted to open a certicard or just have some granules to make a ring

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#3 2016-08-30 02:10:28

BuggedOut
Member
From: New South Wales
Registered: 2015-07-21
Posts: 1,797
Trades :   39 

Re: Loaning from SMSF

I really want to loan it to myself.  So I would be required to sue myself for the funds if I defaulted?

Seems there is a bit of hypocrisy here somewhere.  Sounds like I can use a SMSF to invest in whatever I like....except myself?

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#4 2016-08-30 02:37:46

Ipv6Ready
Silver Stacker
From: North Sydney
Registered: 2016-01-08
Posts: 2,261
Trades :   39 

Re: Loaning from SMSF

You have to treat SMSF like a bank... it has rules.

Hence technically SMSF cant lend to you MR BugOut or to your related family members direct, it has to be via business entity.

So if you owned a coffee shop, the SMSF is lending to the coffee shop (not you) - now if the coffee shop default you would chase that money legally if it was a stranger like any business?

No difference.

Lets look at a silly scenario... You want to buy a Audi for personal pleasure.

You make up a fake business plan and call it - Audi A8 Hire LTD, stating you will charge X amount of dollars per ride for joy riders and wedding etc. and that 20 rides per months generating $2000 of income, minus expense and you can comfortably pay back $1000 for principle and interest

You approve the loan from SMSF to Audi A8 Ltd

Now you are paying back Interest and principle, no problem.

You lose your job (fingers crossed you dont)

You stop paying....

If this was your personal saving money - no dramas.
If it was St geroge bank they will chase you for the money - maybe bankrupt you
If this is SMSF just like ST George it must sue for the money -> maybe even bankrupt you to get the money back in the SMSF.


WTB 4 to 6 grams of pure gold. Don't care if it is coin, bar or granules. Near spot, suits anyone who has been tempted to open a certicard or just have some granules to make a ring

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#5 2016-08-30 03:01:41

BuggedOut
Member
From: New South Wales
Registered: 2015-07-21
Posts: 1,797
Trades :   39 

Re: Loaning from SMSF

Good answer, thanks for clarifying.  Much appreciated! big_smile

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#6 2016-08-30 05:54:32

SilverDJ
Member
From: Australia
Registered: 2014-11-01
Posts: 2,528

Re: Loaning from SMSF

Ipv6Ready wrote:

You have to treat SMSF like a bank... it has rules.
Hence technically SMSF cant lend to you MR BugOut or to your related family members direct, it has to be via business entity.

I believe that's how ti works too. It definitely works that way for property you buy in the SMSF, you can only rent it out to Pty Ltd companies. So if you are a sole trader or partnership then you can't do it.

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