Lisa Galbraith, CEO
As an SMSF trustee, I've recently been discussing the SMSF borrowing possibilities with friends – what a spread of views there are.
Every day, the interest (and Cleardocs helpline calls) about borrowing through an SMSF are increasing. People seem more positive about their economic outlook — or maybe they're just trying to recover some of the lost value in their funds. Trustees want to learn and are keen to understand the rules and the pitfalls and "what does the bank need?"
In the current credit environment, the banks are even more focused on their bottom line, on keeping their risk profiles down, and on passing any risk they can to someone else. Combine this with the newness of borrowing in a super fund, and your bank could be sending you through some pretty confusing hoops with pretty "interesting" fees.
As SMSF trustees, we need to make sure that a loan that works for the bank — works for us too. The fact that a bank lets SMSF trustee(s) structure a loan a certain way, or borrow to buy a particular asset, does not mean that superannuation law allows that structure, or allows the trustee(s) to acquire that asset for the fund.
Here at Cleardocs, we see the banks caution in their internal processes – in particular their document requirements. Although SMSF law is federal and the banks are national, the approach the bank branches takes is far from consistent. Sometimes, for example, a branch in NSW requires different words in the documents than a branch from the same bank in Queensland. This must be adding to costs, delay, and frustration.
We are working to ease this pain for our customers by tailoring our documents for each specific bank. (We can do this only once a bank settles a national position.) But it is clear from the calls we get that the bank that sorts out its processes first will draw the crowd.
Next week, Cleardocs is hosting an SMSF borrowing breakfast seminar with our lawyers and representatives of some banks. (Look out for the video of the event on our site).
As a trustee, I am looking forward to getting some clarification around what the banks want and why they charge so much in fees!