SMSF borrowing from related parties
You are permitted to borrow money against your home loan or other financial resource to lend to your SMSF to help finance the purchase of an investment property within your superannuation fund.
How to Borrow to benefit your SMSF
Depending on the type of property investment, its location, rental return, capital appreciation and ongoing costs, this is generally a good strategy for high wealth individuals to fast track the growth of their superannuation assets. However, it is not without its risks.
Where you have lent money to your superannuation to purchase an investment property the interest rate you charge on that loan must be at arms length. To be at arms length the Australian Taxation Office (ATO) generally require that interest rate match the Reserve Bank of Australia (RBA) investor home loan rate for the month of May each financial year. Therefore, the interest rate for the 2017/18 financial year is 5.80% up from 5.65%.
Note also where you have lent money for the superannuation fund to buy listed securities the interest rate for the 2017/18 financial year is 7.80%.
Beware, this may cause unintended tax consequences for the lender (you) as you will be in receipt of this assessable interest income.
Should you require any further information on SMSF borrowing please feel free to contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.