Can SMSF Borrow Money From Members?
Self-managed super funds are a type of superannuation managed by at least two members. SMSFs are heavily regulated to ensure all transactions and investments are done legally. Many of these regulations have to do with borrowing and lending to purchase assets.
Borrowing With a Self-Managed Super Fund
Trustees of an SMSF can use a limited recourse borrowing arrangement to purchase any single asset, such as an investment property. They can also use a LRBA to buy a collection of assets with the same market value, such as shares in a company or other business. Any asset purchased by the fund is kept in a separate trust. This separation within the fund is to help protect the other assets in the fund in case of loan default.
Are members of an SMSF allowed to loan money to the fund? Yes. However, any transaction that takes place between the fund and any of the members will be watched by the Australian Taxation Office to ensure all regulations and guidelines are met. The ATO will also make sure the loan is only being used to increase the retirement benefits of the members. In addition, the loan has to be the same as any other loans on the market.
If you have a self-managed super fund and need to borrow money from other members, consult with the experts at Mortgage House. We can help you make sure the loan meets government regulations. Our experts will also help you weigh the pros and cons of borrowing money from another member of the fund.