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Published 09 July 2012 05:45, Updated 10 July 2012 04:36
Since 2007, self-managed super funds (SMSFs) have been able to borrow through a “limited recourse borrowing arrangement”.
“Borrowing under an LRBA means that other super fund assets are protected and can’t be accessed by the lender should the property be repossessed, and subsequently sold at a loss, if the fund trustee stopped making payments,” says La Trobe Financial vice-president of lending Iain Pepper.
If your SMSF was set up before 2007, its trust deed may need to be updated to allow borrowing. Your lawyer will set up a “bare trust” to hold the legal title and grant a mortgage to the lender. Anyone can be a trustee of the bare trust except you – you can’t hold an asset in trust for yourself.
If you want your SMSF to buy more than one property, you can’t do it through one bare trust unless the properties are a “single acquirable asset”, such as a unit with parking on a separate title.