+ Superannuation Trust Deed All lenders require specific powers in the SMSF Trust deed so you will need to ensure your deed is an up to date deed (post June 2008) and specifically covers the following:   – Power to borrow – Power to give security – Power to appoint a nominee – Conflict of Interest Powers (bare trustee is related to SMSF Trustee) If your deed is not up to date &/or does  not specifically cover the above you will need to have prepared an update of your SMSF’s rules. Lenders have very specific requirements for the wording of the borrowing and asset charging ability of the trustees of the SMSF’s. A simple borrowing clause in your rules will usually not be accepted. Some lenders are also charging a fee for each reading of your trust deed so you will want to have it right the first time. + SMSF Investment Strategy The trustee/s of the fund will need to ensure that their investment strategy is properly documented and adequately provides for the fund to borrow to acquire a particular type of asset. The requirements of an investment strategy can be found at Section 52 of SIS. + Bare trust Documents You should also make sure that the bare trust documents that you are going to use are properly prepared and acceptable to your lender. Because the relationship between the SMSF trustee and the company holding the property is a bare trust there is no actual name given to the trust relationship. After they have found a property they need to set up their Security Trustee to hold the property on their behalf. This will need to be a separate company to the trustees of the SMSF. The reason for this is that you can’t hold an asset in trust for yourself and section 67(4A) clearly requires the asset to be held on trust. Lenders are also showing that they will only lend to a corporate security trustee and also only to SMSF’s with corporate trustee’s. You MUST ensure that the security trustee is set up BEFORE you enter into a contract to purchase the property as the Security Trustee will need to be the purchaser on the contract. It is vitally important that all the bare trust documentation be correctly stamped according to your own state laws and that the documentation be stored safely. A loss of these documents will almost certainly mean that you will incur stamp duty when transferring the property back to the SMSF trustee. Attention Accountants...............for all your SMSF loan document requirements we use.................. + Security Deed Once you have set up the Security Trustee you can formally apply for the loan and also set up your Security Deed and Instalment Deed. In addition to these documents and depending on your own state laws you may also need a Statutory Declaration by the SMSF trustees stating that they are the real purchaser of the property even though it is held by the Security Trustee. This is to assist in evidencing the real purchaser when you eventually want to transfer the property back after repayment of the instalment loan. + Instalment Warrant + Contract for Sale Contracts can now be exchanged with the purchaser of the property being the Security Trustee. It is important that your conveyancing is done correctly especially ensuring that the correct purchaser name is shown on the contract for sale. Poor conveyancing will lead to stamp duty concerns in the future if you have difficulty proving the real purchaser. You also need to ensure that the timing of the documents does not create a double conveyance of the property. + Loan Documentation  Once you have set up the Security Trustee you can formally apply for the loan and also set up your Security Deed and Instalment Deed. In addition to these documents and depending on your own state laws you may also need a Statutory Declaration by the SMSF trustees stating that they are the real purchaser of the property even though it is held by the Security Trustee. This is to assist in evidencing the real purchaser when you eventually want to transfer the property back after repayment of the instalment loan.       The ATO in taxpayer alert 2008/5 have expressed concerns about personal guarantees where that guarantee may give the lender indirect access to the other assets of the fund. This could occur where a guarantor had recourse to the trustee of the SMSF for any payment made as a result of any guarantee. It is therefore important to ensure that this can not be the case in any personal guarantees that are given. CST allows can provide an agreement between the SMSF trustee and the guarantors stating that the guarantors have no rights against he SMSF assets. Some lenders are also refusing to lend to personal trustees of an SMSF where personal guarantees are required.   Navstar Financial Services & Solutions Pty Ltd ABN 14 110 510 024 An essential part of the new legislation is that a "Bare Trust" must be formed, which will then hold title over the security property for the sole beneficial interest of the SMSF and it’s members. Lenders will also have to lend to SMSF’s on a limited recourse basis (ie their recourse will be limited to the property, thereby providing the SMSF absolute protection for its other assets). The SMSF will charge its beneficial interest in the property to the lender. In addition, the Property Trustee will grant a limited recourse mortgage over the legal estate to the lender. The SMSF will make loan repayments to the lender in the ordinary way. SMSFs can deal with the property however and whenever they like, in the same way as you can deal with "normal" investment properties (eg: lease, renovate, repair, or sell). The SMSF can pay out or reduce the mortgage at any time (subject to the terms of the relevant loan). When the mortgage is paid out in full, title to the property may be transferred to the SMSF by the Property Trustee or the Property Trustee may continue as registered proprietor. It is important that the structure clearly complies with all the above requirements. Failure to do so may result in the SMSF becoming a "non-complying" superannuation fund within the meaning of the SIS Act which may result in significant stamp duty, taxation and GST liabilities. Documentation An essential part of borrowing through an SMSF is that your documentation is 100% correct and compliant. An understanding of the major documentary requirements are as follows; SMSF LOAN STRUCTURE Australian Credit Licence Number 385525