Thursday, August 28, 2014

SMSF borrowing with Cleardocs: Clarifying the steps

Lisa Galbraith, General Manager Cleardocs

Borrowing through your Self Managed Superannuation fund continues to be an important strategy for trustees.  At Cleardocs, we often have customers asking how to get started.  This blog highlights some of the useful resources on Cleardocs and the document order process.  Obviously, any borrowing arrangement needs to be carefully considered.  We always recommend our users obtain professional legal and financial advice as Cleardocs cannot (legally) provide this.

The process
Step 1:
You must have an existing SMSF trust deed that allows borrowing.  If your deed was established before July 2010 and has not been updated since then, it is unlikely to have the borrowing clauses that the banks like to see.  The banks are looking for very specific wording in relation to borrowing; older deeds typically do not include the appropriate phrasing.  If you have a Cleardocs SMSF, you need to have a deed of version 11 or greater.

Step 2:
Meet with your lender to clarify the necessary structures and borrowing limits.  For example, the bank may want the trustee of the SMSF and/or the trustee of the bare trustee to be a company.

The corporate trustee for your bare trust cannot be the same as your SMSF corporate trustee. In this instance, you will need two companies.

Step 3:
With the understanding of your preferred lender's requirements, you can create the necessary borrowing documents through Cleardocs.

If you need to change your SMSF trustee, you must first order the SMSF Change of Trustee document package from Cleardocs. Then, if your lender requires a corporate trustee for the bare trust, you will need to register a company  – Cleardocs company registration package does this for you.

Cleardocs has two borrowing packages – SMSF borrowing (bank) and SMSF borrowing (related party).  This will be the final package of documents you need. 

Once you have completed the packages, our lawyers at Maddocks recommends you provide the unsigned borrowing package (together with your SMSF documents) for your lender or bank  to review – this is because it is much easier to make changes when the document is unsigned.  lender

Step 4:
Once all the parties are satisfied with the documents you are ready to purchase the required assets.

The legal structures and parties involved with borrowing can be complicated.  To help you through the process, Cleardocs with our lawyers at Maddocks have developed a number of helpful resources.  Our borrowing product page is the best place to start.  Look out for:

ClearLaw articles on a wide range of SMSF topics

As always, please call the Cleardocs Helpline on 1300 307 343 if you have any questions.

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