Self-managed super funds (SMSF) give individuals the opportunity to make their own investment decisions, limited only by the funds investment strategy.

The increased availability of bank finance means that even small funds now have the opportunity to borrow to purchase real estate.

 “The most important rule to follow is that property being purchased must be for investment purposes and not for personal use,” said Nigel Blundell, Director of property and commercial law at msl |michael sing lawyers.

“Many investors now have access to funds that previously could not be used, which opens a whole new avenue to invest in a growth property market,” says Mr Blundell.

The benefits of such a strategy include attractive taxation treatment of income and capital gains.

It also affords an ideal opportunity for businesses to secure their own business premises for the future with themselves as a reliable long-term tenant.

In order for a SMSF to borrow, a separate Property Trust must first be established to hold the legal interest in the property while the SMSF will hold the beneficial interest.

“When buying property it is essential you get proper advice beforehand and get the trust structure in place before signing a contract.” says Mr Blundell, “otherwise, you will end up with several difficulties further down the line.”

The SMSF obtains the funding from the lender and makes all loan repayments, however security is provided by mortgage from the Property Trustee over the property.

The SMSF has the right to acquire the legal ownership of the property upon repayment of the loan.

The lender only has recourse to the mortgaged property in the event of default and not to the assets of the SMSF.

However, in practice many lenders require guarantees from fund members in their personal capacities.

Most of the major banks have now established lending products for SMSF’s however their requirements and charges vary.

It is important to note that it is not possible to refinance bank borrowings to a SMSF, which can mean you become locked in to a less than competitive loan.

An alternative to bank lending, if the financial resources are available, is to borrow in your own name and on-lend the funds to your SMSF.

This allows maximum of flexibility not only in sourcing of funds but also in refinancing should the need occur.

 The management of the property is carried out in the usual way by the SMSF and once the mortgage is paid out, the property ownership can be transferred to the SMSF in its own right, or it can simply remain owned by the property trustee.

“Whether you currently have a SMSF, or are looking at starting your own, it is essential that you get proper financial and legal advice.” Said Mr Blundell.

msl is an award winning full-service law firm with offices in Brisbane and on the Gold Coast.

To find out more information on setting up or managing you SMSF visit www.mslawyers.com.au or contact msl on 07 5597 8888 or This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .