Common Mistakes when buying Property in Your SMSF Bare Trust
Looking to invest in property through your Self-Managed Super Fund (SMSF)? You're not alone. It's a smart move for many Australians, but it's crucial to get things right from the start.
At Hewlett Legal, we've seen clients encounter hurdles, particularly when it comes to setting up their SMSF Bare Trusts for property purchases. Let's break down the process in plain language, so you can steer clear of these pitfalls.
Understanding the SMSF Bare Trust
First things first, what's a Bare Trust? Think of it as the middleman between your SMSF and the property you want to buy. It's a legal entity that holds the property on behalf of your SMSF until any loans are paid off. This setup keeps things neat and tidy, ensuring you comply with the rules and keep your SMSF assets separate from the property.
The Step-by-Step Process
Get Your SMSF Sorted: Start by setting up your SMSF properly. If you're not sure how, don't worry. Our team can guide you through it or connect you with the right experts to make sure everything's in order.
Set Up the Bare Trust: Now, onto the Bare Trust. This is where things can get a bit technical, but we're here to simplify it for you. The Bare Trust is like a guardian for your property, holding it in its name while your SMSF reaps the benefits.
Secure Financing: Ready to finance your property purchase? You'll need to arrange a Limited Recourse Borrowing Arrangement (LRBA). We'll help you present your SMSF's financial health to the bank, making sure you get the best deal possible.
Property Acquisition: Once the financing is sorted, it's time to seal the deal. The Bare Trust, acting as trustee, will officially acquire the property. Simple, right?
Repayment Structure: Managing loan repayments is key. We'll work with you to create a repayment plan that fits your SMSF's cash flow, using rental income and other assets to stay on track.
Meeting Legal Requirements: Let's not forget the legal stuff. Our team will ensure you stay on the right side of the law, handling audits, tax reporting, and all the nitty-gritty details so you can focus on your investment.
The Bottom Line
Here's the deal: Mistakes in setting up your SMSF Bare Trust can lead to headaches down the line. But with Hewlett Legal by your side, you can avoid these pitfalls and make your property investment journey smooth sailing. Still have questions? Want to get started? Get in touch with us today, and let us make your SMSF property purchase a stress-free experience, now and into the future.
Reach out to Lucas to chat about your situation:
Direct line: (07) 3310 8716
Email: Lucas@hewlettlegal.com.au
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