SMSF lending for commercial premises, arranged through Lyft Financial.

A smaller panel than for ordinary commercial lending. Several of the major banks have stepped back from SMSF lending, and the market is now served mainly by non-bank and specialist lenders, with a few banks remaining. Rates are a little higher than standard commercial loans and terms run up to 20 or 30 years. Lyft Financial works across this panel and knows each lender’s rules on property type, fund size and liquidity.

On top of the usual purchase costs, an SMSF borrowing needs a bare trust, sometimes called a holding trust, with its own trustee, which involves legal setup fees, and lenders charge establishment and legal review fees for the arrangement. A corporate trustee for the fund is usually required. Your accountant or SMSF adviser sets up the structure and advises on whether the purchase suits the fund; Lyft Financial arranges the finance to fit it.

It is possible where the property is genuine business real property and the arrangement complies with superannuation law, typically through a limited recourse borrowing arrangement. The fund borrows, a bare trust holds the asset, and the business pays market rent to the fund under a lease. Lenders apply conservative LVRs and want the fund to hold a liquidity buffer. This is an area where you need advice from your accountant and a qualified SMSF adviser before you commit.

Yes. A self-managed super fund can borrow to buy commercial property using a limited recourse borrowing arrangement, and the property can be leased to your own business at market rent, which many owner-operators use to buy their premises inside super. Lenders generally finance up to about 65 to 75 per cent of the value, require the fund to hold a cash buffer, and expect the trust structure to be set up correctly before settlement. Advice from your accountant or financial adviser is required, and Lyft Financial works alongside them.

A self-managed super fund borrows through a limited recourse borrowing arrangement: the property is held in a separate bare trust for the fund, the fund pays the deposit and the loan repayments from its balance and contributions, and if the loan defaults the lender’s recourse is limited to that property, not the rest of the fund. The fund can lease the premises to your own business at a market rent, which many owner-operators use to buy their own premises inside super. The structure must be set up correctly before the contract is signed.

Lenders generally finance 65 to 75 per cent of a commercial property’s value for an SMSF, so the fund needs a deposit of 25 to 35 per cent plus purchase costs from its existing balance. Lenders also usually require the fund to keep a liquidity buffer of around 10 per cent of the property value after settlement and to show that rent and member contributions comfortably cover the repayments. Loan sizes commonly range from $200,000 to several million.

Yes. Commercial property, known as business real property, is the one type of property an SMSF can lease to a related party. The lease must be on arm’s-length commercial terms with market rent, paid on time, and documented, and the rent then flows into the fund as income taxed at concessional rates. This is the main reason business owners buy their premises through super. Residential property cannot be leased to members or relatives.

Not with the borrowed funds. Under the limited recourse rules, borrowed money can be used to buy the property and to repair or maintain it, but not to improve it in a way that changes its character, and the property cannot be subdivided or developed while the loan is in place. Improvements can be funded from the fund’s own cash. This constraint is one reason the structure suits established premises rather than development sites.

The fund’s trust deed and the bare trust deed, the fund’s last two years of financial statements and tax returns, evidence of the fund’s cash balance and members’ contributions, the contract of sale, any lease on the property, and identification for the trustees. Lenders also review the fund’s investment strategy to confirm the property fits. Your accountant and Lyft Financial assemble the pack together.

Allow six to ten weeks. The bare trust needs to be established before exchange, the lender values the property and reviews the fund, and the trust and loan documents take longer than a standard purchase. Negotiating a longer settlement in the contract avoids pressure. Start with Lyft Financial and your accountant before you make an offer so the structure is ready.