When an SMSF takes out a loan to purchase an asset, such as property, it must be done through an LRBA. An LRBA is a special type of loan that is secured by the asset being purchased, and the lender only has limited recourse to other assets in the SMSF if the loan defaults. This means that the SMSF must have sufficient assets to cover the loan in case of default, which can make the borrowing process more complex and require more careful financial planning.

SMSFs are subject to strict legal and compliance requirements, including rules around investing and borrowing. Borrowing within an SMSF requires careful consideration of these rules, which can make the process more complex and time-consuming.

Managing an SMSF can require a higher level of financial and legal expertise than a normal mortgage. SMSF trustees are responsible for ensuring that their fund complies with all legal and regulatory requirements, and that their investments are suitable for their members. This can require the help of financial advisors and other professionals, which can add to the complexity and cost of the borrowing process.

SMSF Lenders need to assess the risk of lending money to an SMSF because the fund's investments are ultimately intended for retirement savings. Lenders need to ensure that the SMSF can afford the loan repayments and that the loan is a suitable investment for the fund.

Lenders’ request details of personal income, expenditure, assets and liabilities of each SMSF member as they will be servicing guarantors for the loan.  As brokers, we have to satisfy “Best Interest Duty” – essentially ensuring that anyone potentially liable for repaying the loan has the capacity to do so without causing significant financial distress. 

Likewise, under their responsible lending obligations, the lenders are required to confirm that a servicing guarantor will be able to make repayments when they fall due if the SMSF, for whatever reason, is unable to make those repayments.

SMSFs are subject to strict compliance requirements, including rules around investing and borrowing. Lenders need to ensure that the loan complies with these rules to avoid any potential penalties or legal issues.

SMSFs can have complex investment structures that require more information for the lender to fully understand. This includes information about the fund's members, trustees, assets, and investment strategies.

The lenders will require you to bring all of your documents to a lawyer, and have the lawyer sign off that they went through these documents with you. It is important to note that not all lawyers will provide this service so contact your personal lawyer well in advance and ask them.

We recommend you download a copy of the document below and email it to them to confirm they can in fact assist you with this service. If they can’t or you don’t have a lawyer, we can recommend lawyers that operate locally to Mornington Peninsula. 

You are required to obtain a Certificate of Independent Financial Advice (AKA Accountant Certificate) from a financial adviser or accountant that they have met with you and gone through a number of aspects of the LRBA, contributions, loan repayments and other financial aspects of the documents and your situation.

If you work with Smart Business Solutions or Smart Private Wealth as your accountant or financial adviser we will be able to complete this for you.
If we are not your accountant or ongoing financial adviser, please download a sample copy of the document and confirm with your accountant that they are willing to sign it.

A lot of accountants who are not licensed financial advisers, may not have the licenses or qualifications to provide advice in relation to limited recourse borrowings arrangements, and are therefore unable to sign the document.

Please do note, that whilst it is the signing of the document, similar to the lawyers, our professional bodies require additional workpapers to be maintained as support for why we were comfortable in signing the document.