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Wealthtrac Pty Ltd was formed in 2003 as a distributor of superannuation and investment products under the Wealthtrac brand. Since inception the business has consistently grown each year, and today has significant presence in the industry.
We hold an Australian Financial Services License (AFSL 404335) but do not provide financial advice and outsource all product administration and Trustee roles. We use best of breed outsource solutions for our products.
SuperGuardian Pty Ltd a Chartered Accounting firm and specialist self managed super fund (SMSF) Administrator, with more than 18 years industry experience, administer the Wealthtrac SMSF service. By combining the latest web technology with a high level of personal service, they provide a premium SMSF service that represents value for money.
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For the latest news about Wealthtrac SMSF and our products and services, tap the button below to go to our website.
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SMSF's can seem complicated, but here's some information that can quickly and easily help you plan and manage your own SMSF.
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Understanding Limited Recourse Borrowing:
In general, superannuation funds are prohibited from borrowing money. Limited recourse borrowing arrangements (LRBAs) however, are one of the exemptions.
A LRBA requires an SMSF Trustee to take out a loan from a third party lender. The Trustee then uses those Funds to purchase a property to be held in a separate trust. Any investment returns earned from the property go to the SMSF Trustee. If the loan defaults, the lender's rights are limited to the property held in the separate trust. This means there is no recourse to the other assets held in the SMSF.
Section 67 of the Superannuation Industry (Supervision) Act 1993 (SIS Act) contains the rules that enable superannuation funds to borrow to invest. The four conditions that must be met for LRBAs are:
Held in Trust
The property needs to be held in holding trust, a trust that only holds the property for the duration of the loan. These are bare trusts. Most lenders require the SMSF Trustee to be a Corporate Trustee, the Trustee cannot be the same company as the SMSF Trustee company but may have the same directors as the SMSF Corporate Trustee (ie. members).
Ownership
Since the SMSF must have the right to acquire ownership of the property, then the SMSF cannot purchase a property jointly with another party.
Limited Recourse Loan
Only the property purchased can be used as security for the loan.
Guarantees
Personal guarantees can be provided but are limited to rights relating to the property.
Structure
In general, there are 5 parties involved with a LRBA:
Replacement Assets
In general, when the property is sold, the loan will need to be repaid. If there are any future borrowings, a new loan arrangement will need to be established.
Under Section 67B of the SIS Act, instances of when a property cannot be replaced are specified, these are:
Any changes made to the original property can lead it to be classified as a replacement property and become in breach of the borrowing provision. Maintenance and repairs are allowed for a property but improvements and alterations are not.
Insurance
Public liability insurance should be considered.
The rules and regulations associated with SMSFs are complex, so please seek advice and clarification from your adviser.
Source: ato.gov.au
The following outlines the process to invest in property through an SMSF:
Step 1: Setup your SMSF
If you don't have an existing SMSF then the first step is to establish this through the SMSF section of the wealthtrac.com.au website.
Once the SMSF has been established Wealthtrac will send you a Welcome Pack.
Step 2: Rollover your superannuation benefit and contribute to the SMSF
Once the SMSF has been established you can rollover your existing superannuation funds and commence making contributions to your SMSF.
Step 3: Have your loan pre-approved
It is advisable that a loan pre-approval is received to ensure that you will not be liable for unnecessary application fees and bare trust fees in the event that the loan application is rejected. Your adviser and your bank will help arrange the pre-approval.
Step 4: Setup a Bare Trust and Trustee Company
For an SMSF to borrow to buy property it must establish a bare trust that owns the property. The bare trust Trustee must be a company and the property is purchased in the name of this Trustee company. The directors and shareholders of the Trustee company must be the Trustees of your SMSF (if you have individual Trustees) or the directors of the SMSF Trustee company (if you have a Corporate Trustee for your SMSF). The bare trust Trustee company cannot also act as the Trustee of your SMSF. Wealthtrac can arrange the establishment of the Bare Trust and Trustee Company. (Please refer to our fees section for fees relating to the establishment of the Bare Trust and Trustee).
Step 5: Sign Bare Trust establishment documents
Documents to establish the bare trust will be forwarded to you for signing. This documentation should be signed and retained until the property purchase has been settled. The signed documentation should then be returned with the Purchase Contract to Wealthtrac.
Step 6: Purchase the property
Once the bare trust documentation has been signed you can purchase the property. When signing the Purchase Contract please ensure the following occurs:
Step 7: Return the Bare Trust and property Purchase Contract documentation to Wealthtrac
Once the Purchase Contract has been signed a certified copy of the signed Purchase Contract together with the bare trust documentation signed should be returned to Wealthtrac at GPO Box 1215 Adelaide SA 5001.
Step 8: Stamping of the Bare Trust
On receipt of the documentation, you will need to arrange the stamping of the bare trust with the State Revenue Office if required. Wealthtrac will advise you on the process to do this at the relevant time.
Step 9: Final loan approval granted by lender
Once final loan approval has been granted, the lender will forward the Loan Offer Document to you for signing.
Step 10: Loan Offer Documents to be signed and returned
The Loan Offer Documents will need to be signed and returned to the lender.
Step 11: Property settlement
At settlement the mortgage funds will be transferred by the lender and if applicable cash may be also paid from the SMSF. The vendor at that time will provide a copy of the signed transfer of the property to you, the Trustee of the bare trust, this process will be managed by your solicitor or conveyancer.
Step 12: Property transfer and mortgage registration
The property transfer to the bare trust Trustee and the mortgage are registered. This will also be arranged by your solicitor or conveyancer.
Step 13: Property rent and expenses
After settlement the property can be rented. The rent must be deposited into the SMSF bank account. All property expenses including loan repayments will be made from the SMSF bank account.
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Wealthtrac SMSF
App category: | Banking & Finance |
Updated: | May 15, 2023 |
App Publisher: | Wealthtrac |
Compatible with: | iOS 6+, Android 4+, Blackberry 10+ and Windows Phone 8+. |
Legals: | Terms of use |
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