Your SMSF can now borrow to invest in real estate, allowing you to accelerate wealth accumulation and diversify your investment portfolio.

There are laws restricting the use of SMSFs to borrow money, and restricting the recourse of the lender in the event that the trust cannot meet its repayment obligations.

A basic outline of the rules a trust must follow in order to borrow money, is as follows:

• The asset is an asset the SMSF could otherwise legally acquire (if it had the funds).
• The asset is held on trust for the SMSF using a Security Trust (known as a Security Custodian).
• The SMSF acquires a beneficial interest in the asset from the outset.
• The SMSF has the right to acquire legal title from the Security Trustee upon making all loan repayments.
• The lender must only have limited recourse against one particular asset. This means that in the event of a loan default, the lender must not be able to claim any other assets of the fund.
• Each borrowing arrangement can only be for a “single acquirable asset”. In the case of strata title or subdivisions, each title is considered a separate asset.