Borrowing in Super
How Does It Work?
Your SMSF borrows funds to acquire an asset (eg residential and/or commercial property) and a separate trust is established to hold legal ownership of the property on behalf of your SMSF. These trusts are being referred to as security trusts or warrant trusts. A loan is then organised to meet the balance of the purchase price (plus costs) that your SMSF isn’t providing. The SMSF then manages the property in the same way as you would any other real estate investment.
The loan is a limited recourse loan and the asset (property) is used as security. In the event of a loan default, the lender only has recourse to the residential and/or commercial property. They cannot claim on any other SMSF assets.