An SMSF can refinance an existing SMSF loan. This is beneficial for Limited Recourse Borrowing Arrangements (“LRBA”) entered into many years ago where interest rates were higher with less SMSF lenders in the marketplace.
Currently, SMSF lending is competitive with many if not all lenders offering a SMSF Loan product. After all, SMSFs is a $600 billion industry and the banks are rushing into SMSFs to cash in.
Why Refinance an existing SMSF Loan?
SMSF Loans have grown considerably. Interest rates may vary between lenders amd existing loans may be at a higher rate than the comparison rate. By refinancing, you may be able to access a more competitive loan than was entered into a few years ago, and the product offering may include an offset which may provide cash flow savings for the SMSF. A fresh perspective from an experienced SMSF financial advisor may result in savings to your SMSF!
Is Refinancing compliant with Superannuation Law?
Yes it is if done correctly. ATO ID 2010/169 provided confirmation that refinancing satisfies s67A of Superannuation Law and that refinancing will satisfy the ‘single acquirable asset’ principle in that the refinance will not create a new asset and applies to the same Limited Recourse Borrowing Arrangement.
Its obvious that given the competitiveness of the SMSF lending market and competitive rates that SMSF Refinance may be beneficial for SMSF Trustees including interest rate savings and inclusion of an offset account however, it is important to seek professional advice before proceeding with a refinance to ensure you understand the Finance, Taxation and Superannuation Law Consideration’s before proceeding with SMSF refinance.
Important Disclaimer: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal financial or credit advice – Redwood Advisory Pty Ltd does not hold an Australian Credit License. Consider the appropriateness of the information in regards to your personal circumstances.