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Antony Joseph

Sep 09, 2022

Combining two super funds to purchase apartment with LRBA loan

in SMSF Technical Forum

Two independent super funds with a balance of $ 200K each wants to purchase an apartment costing 800K with a loan of 400K .

Question is how do we structure the loan from a external lender. Do we need two bare trusts of each super fund . In that case the tittle of the apartment will show two bare trustee names ? . Do the lenders happy with such an arrangement ?

Any help will be much appreciated

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

Sep 09, 2022

Hi Antony

Yes my understanding is that 2 SMSF's can invest as tenants in common and each enter into a separate LRBA's from an external lender. I have not seen one set up this way. Each SMSF would each have a separate bare trust.

It is difficult as each SMSF needs to ensure that their part of the property is not used as security for the other SMSF's part of the property. Yes on that basis each bare trustee's name will be on the title. Each SMSF has to acquire a single acquirable asset.

I expect lenders will not like the arrangement given the legal issues noted above. If other members have experience with this issue please let the forum know.

Both Funds if they are to proceed need legal advice to get the structure set up correctly.

I also note there are other options such as:

1) The 2 SMSF's investing via an "ungeared" unit trust (where they both use other non super property as security for the borrowings).

2) The 2 SMSF's invest via a non related party "geared" unit trust.

3) The 2 SMSF's invest in a unit trust and they use the units as security to do an LRBA.

Again given the different options it is best that they get legal / professional advice re the different options.

Thanks

SMSF AAA