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SMSF Case Studies & Resources

Real scenarios, expert solutions, and educational insights to help you navigate SMSF property lending with confidence.

CASE STUDY Queensland

SMSF Off-the-Plan Purchase Gone Wrong

What happens when an SMSF can't secure funding at settlement and members transfer the property to personal names without returning the deposit?

The Situation

An SMSF in Queensland paid a deposit for an off-the-plan property purchase. As settlement approached, they couldn't secure funding. Instead of losing the deposit, the members transferred the property into their personal names and completed the purchase with bank finance—but didn't return the deposit to the SMSF because they didn't have the funds.

The Problem

Key Compliance Issue: Did the SMSF provide a benefit to the members by effectively loaning them money? This could breach SIS 65.1.b—no loans or financial assistance to members!

Consequences

  • Auditor likely to lodge contravention report with ATO
  • Deposit must be repaid (unless members meet condition of release)
  • Interest may be owed on the deposit amount
  • ATO could impose penalties if breach not fixed

The Right Way

If the deposit had been repaid to the SMSF when the contract was transferred to personal names, there wouldn't be an issue. The ATO doesn't penalise funds for failing to obtain finance for settlement, as long as everything else is handled correctly.

Key Lesson: Always ensure SMSF funds are returned immediately if a transaction doesn't proceed through the SMSF. Failing to do so can result in serious compliance breaches and ATO penalties.

EDUCATIONAL

How SMSF LBRA Property Purchase Works

Step-by-step guide to acquiring residential investment property through your SMSF using Limited Recourse Borrowing Arrangement (LBRA).

Example Scenario

Total Purchase Price

$400,000

Including stamp duty & costs

SMSF Cash

$200,000

50% deposit

Bank Loan

$200,000

Limited recourse

Initial Deposit

$40,000

10% at contract

The Process

1

Trust Deed & Investment Strategy

SMSF's trust deed allows borrowing, and investment strategy is reviewed and updated.

2

Security Trust Setup

Trustee approaches bank for limited recourse loan and sets up Security Trust deed. A company is formed to act as Security Trustee.

3

Contract & Deposit

Security Trustee signs the sale contract and uses $40,000 from SMSF to pay the deposit.

4

Settlement

SMSF Trustee provides $360,000 (from own and borrowed funds) to Security Trustee, who settles on property and becomes legal owner.

5

Beneficial Interest

SMSF Trustee acquires beneficial interest in the property through the Security Trust deed.

Important: This structure protects the SMSF's other assets through limited recourse borrowing—if the loan defaults, the lender can only claim the property held in the Security Trust, not other SMSF assets.

EDUCATIONAL

Understanding Gearing in Your SMSF

Learn the three types of gearing arrangements and their tax implications before borrowing through your SMSF.

Before diving into borrowing through your SMSF, it's crucial to understand the different types of gearing arrangements and their tax implications.

Positive Gearing

When the income from your investments is more than the loan interest and other expenses.

Tax Impact: The excess income is taxable by the SMSF at 15% (or 10% for capital gains held >12 months).

Example: Rental income $25,000/year, loan interest + expenses $20,000/year = $5,000 taxable income

Neutral Gearing

When the income from your investments is equal to the loan interest and expenses—breaking even.

Tax Impact: No taxable income or deductible losses. The investment is self-funding.

Example: Rental income $20,000/year, loan interest + expenses $20,000/year = $0 net income

Negative Gearing

When the income from investments is less than the loan interest and expenses.

Tax Impact: The excess expenses can be used to reduce other sources of assessable income within the SMSF (like rental income from other properties or dividends).

Example: Rental income $18,000/year, loan interest + expenses $25,000/year = $7,000 loss (can offset other SMSF income)

Important Consideration

Unlike personal investments, SMSF negative gearing losses can only offset income within the SMSF—not your personal taxable income. Ensure your SMSF has sufficient income sources or contributions to cover negatively geared investments.

EDUCATIONAL

Maximise Your SMSF Property with Tax Depreciation

Learn how to claim deductions for building structure, improvements, and plant & equipment to maximise your SMSF property returns.

If you're managing your own super fund and property is part of your investment strategy, make sure you're maximising its potential! SMSF Trustees can claim deductions for wear and tear just like other property investors.

What's Tax Depreciation?

The ATO allows the cost of construction and fit-out of investment properties to be claimed over time against income earned. A tax depreciation report details the amounts you can claim over a 40-year period.

Eligible Properties

  • Residential properties built after 1985 or with significant renovations
  • New residential, commercial, industrial, or agricultural properties
  • Note: Cannot claim on pre-existing plant & equipment in properties leased after July 1, 2017 (but can still claim structural improvements)

What Can You Claim?

Structural Improvements

  • • Main building
  • • Retaining walls
  • • Outbuildings (garage/carport)
  • • Fencing
  • • Swimming pools
  • • Paving & driveways

Plant & Equipment

  • • Window furnishings
  • • Carpet & flooring
  • • Kitchen appliances
  • • Air conditioners & fans
  • • Smoke alarms
  • • Hot water systems

How to Get a Depreciation Report

  1. 1 Engage a Quantity Surveyor (QS) to inspect your SMSF property
  2. 2 QS assesses potential deductions (building, improvements, plant items)
  3. 3 Receive ATO-compliant report with maximum claimable benefits
  4. 4 Provide report to your accountant and auditor for tax returns

Pro Tip: A depreciation report typically costs $600-$800 but can save thousands in tax over the life of your investment. Your accountant and auditor will thank you for having one!

EDUCATIONAL

SMSF Residential Property Investment Loans

Discover how specialist SMSF lenders can help you grow your super fund with residential property investments.

Looking to grow your SMSF with residential property investments? Specialist SMSF loans are designed to align with the investment strategy, goals, and financial needs of SMSF Corporate Trustees acquiring property through their SMSF.

Key Benefits

Borrow Through Your SMSF

Purchase residential investment property with the property held in trust until the loan is repaid (Limited Recourse Borrowing Arrangement).

Flexible Serviceability

Serviceability can be demonstrated through rental income and super contributions, not just personal income.

Tax Deductions

Potential tax deductions by offsetting interest and other expenses against rental income within the SMSF.

Personal Guarantees

Loans can be backed by personal guarantees from SMSF beneficiaries, providing additional security for lenders.

Why Specialist SMSF Lenders?

Traditional banks often struggle with SMSF lending due to complex compliance requirements. Specialist lenders like Resimac, La Trobe Financial, and Bluestone understand SMSF structures and can provide faster approvals with more flexible terms.

How We Help

Evolution Lending Partners has relationships with 30+ specialist SMSF lenders, ensuring you get:

  • ✓ Competitive interest rates
  • ✓ Faster pre-approval (48 hours)
  • ✓ Expert guidance on SMSF compliance
  • ✓ Tailored loan structures for your situation
EDUCATIONAL

Disadvantages of Self-Managed Superannuation Funds

An SMSF isn't suitable for everyone. Understand the key disadvantages before deciding if an SMSF is right for you.

An SMSF isn't suitable for everyone. It depends on your investment funds and the abilities of the trustees/members. Here are some key disadvantages to keep in mind:

Responsibility

All fund decisions rest on you as trustee. You're responsible for keeping the fund compliant with regulations and deadlines.

Risk: Breaches can result in penalties from the ATO. Staying up-to-date with changing regulations is essential!

Limited Ability to Diversify

While SMSFs offer a broader range of assets, not all members will have enough funds to diversify across all options.

Solution: Monitoring performance is critical. Investing in managed/pooled options can simplify this task and provide instant diversification.

Expense

Depending on your investment types and any consulting services, maintaining the fund may be costly.

Typical Costs: Accounting ($1,500-$3,000/year), audit ($500-$1,000/year), ASIC fees ($259/year), plus potential legal, financial advice, and property management fees.

Rule of Thumb: SMSFs generally become cost-effective with balances above $200,000-$250,000.

No Access to Super Complaints Tribunal

SMSF members cannot bring disputes to the Superannuation Complaints Tribunal (AFCA).

Implication: If disputes arise (e.g., between trustees), you may need to go to Court, which can be expensive and lead to significant delays. Retail and industry super funds have access to free dispute resolution through AFCA.

Is an SMSF Right for You?

Consider an SMSF if you:

  • ✓ Have a super balance above $250,000
  • ✓ Have time and willingness to manage compliance
  • ✓ Want control over investment decisions
  • ✓ Have specific investment strategies (e.g., property)
  • ✓ Understand (or have advisors for) tax and legal obligations

Always seek professional advice from licensed financial advisors, accountants, and SMSF specialists before establishing an SMSF.

Ready to Start Your SMSF Property Journey?

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