The below Case Studies are an example of how a SMSF Borrowing Strategy could work in different scenarios:

The Situation

The Solution

After seeking advice, Jim & Rachel implement the following strategy:

The fund borrows $400,000
This is used to acquire a residential property with a value of $500,000
The balance of the purchase price of the property is funded by existing cash in the JR Superannuation Fund

Jim and Rachel plan to hold the asset until they reach pension phase
Any income derived from the property at that time will be tax-free to their super fund, and no CGT will be payable when they sell it.
They will continue to seek advice to ensure this strategy is still appropriate.
Upon retirement, Jim and Rachel will have significantly increased their ability to maximise the funds available to them.

Can borrow to acquire or transfer commercial premises within an SMSF.
Ability to utilise various super and tax strategies to reduce or eliminate any CGT (Capital Gains Tax).
Restructuring of arrangements can eliminate existing non-deductible debt.
Use the potential net proceeds of the sale/transfer for working capital within their businesses

Business premises (Factory) held in Family Trust with a value of $600,000.

Factory has a deductible debt of $200,000.

There is a rental agreement in place between the business and family trust

The SMSF borrows money and holds asset via Bare Trust.
Transfer of the Business Real Property into the SMSF (therefore No CGT payable, and asset is treated as a ‘going concern’)
Family Trust receives $600,000 – which is used to payout the Factory debt of $200,000.
John & Jane payout $300,000 home loan (which is non-deductible debt)
A further $100,000 can be invested, or contributed back into Super or used as working capital within the business.
100% deductible debt for SMSF, being made from deductible super and rental payments in the business, and future growth of property will become CGT exempt (if property is sold post-retirement).