SMSF Loan Process
Purchasing a property within your SMSF
There are 4 streams of process steps – outlined below. 
Many of these can (and should) take place concurrently to prevent delays.  
It is important to note that taking appropriate advice up-front and requesting an indicative loan approval as early as possible will greatly reduce both time frames and stress levels later in the process.
Likely time frames are provided where applicable – but should be taken as a guide only.
Overall target time-lines, from commencement of advice to settlement of the property transaction, are 60 days for newly created SMSFs and 45 days for existing SMSFs.
A basic description of each of the major Steps in the Process is provided below the following Table.
Typical Loan approval to Settlement
1. Obtain an Indicative Finance Approval
Unfortunately many lenders will insist that you go to the expense of establishing all of your SMSF Trust and Bare Trust structures prior to them giving you a loan approval.
However, most lenders have differing requirements of the structures or Trust Deeds to be established.  Thus, should the first lender selected not approve the loan or not offer terms that are acceptable you are very likely to need to change something in your structure for the next lender.  This is not only time-consuming and frustrating, it creates unnecessary expense.
Furthermore, establishing a Security Trust Deed prior to being certain you can move forward on that specific property is simply a waste of time and money as the Deed is specific to the property.

Thankfully, SMSF Loans has negotiated with lenders to allow our clients to receive an Indicative Approval prior to going to any unnecessary expense.  This is true even for those lenders who won’t do this for their own customers - and is just one of the many "battles" we consistently engage in on behalf of our Clients behind the scenes.

We strongly urge you to take advantage of our technical knowledge and 'moral courage' in this area and save yourself time, money and the run around.
2. Establish / review the SMSF
The Trust Deed establishing the SMSF must:
  • Comply with the requirements of the Superannuation Industry Supervision Act 1993 (SIS Act) (including the "sole purpose test - see section 62 of the SIS Act which requires that regulated superannuation funds are obtained solely for the provision of retirement benefits to members).
  • Allow the Superannuation Fund Trustee to ensure that investment in real property is in line with the SMSF's overall investment strategy (note that superannuation funds must have a written investment strategy), and the proposed purchase complies with all other requirements of the SIS Act (including but not limited to the "in-house asset rules" and the restrictions on acquiring assets from "related parties").
3. Establish the Security Trustee and Prepare to Establish the Security Trust Deed
The Security Trust Deed is a key document. Care is required to ensure there are no adverse GST, taxation or stamp duty consequences. It is important that the SMSF Trustee itself is not the Security Trustee. Such an arrangement may breach the requirements of section 67(A) of the SIS Act and result in the SMSF being non-compliant. It is also undesirable for an individual member of the SMSF to act as Security Trustee due to trust law issues regarding the merger of the interests of the trustee and the beneficiary.

The Bare Trust (Security Trust) cannot be established prior to the identification of the security property to be purchased, but everything else can be in readiness so that the process keeps moving once the property is selected.
4. Find the Property
If not already selected or, as is permissible in the case of commercial property, already held by a related entity it is time to select a property to purchase.  Offer and acceptance should be finalised such that the Bare Trust can be established (the exact timing of when the Bare Trust should be executed compared to execution of the Contract of Sale varies between States and is an extremely important matter.  Please ensure you have taken specific advice in this regard).
There are considerations for sourcing investment property, and especially that to be held in a SMSF, which are different to finding a home to live in.
5. Instructions to Solicitors / Conveyancers
Trustees and their Advisers should ensure that the lawyer / conveyancer acting for the SMSF on the purchase of the property understands that the property must be purchased in the name of the Security Trustee. This is an essential part of the structure - the SMSF cannot be the registered proprietor.  Even if it costs a little extra in fees it is well worth engaging the services of a lawyer that specialises in LRBA transactions.  It's a small additional investment ('insurance') against potentially very expensive downstream consequences.
6. Obtain Formal Loan Approval
A valuation will be conducted on the security property and, where it is a purchase, a signed copy of the Contract of Sale will need to be provided.
Following all other Approval requirements, the Trust Deeds for the SMSF Trust and Bare Trust must be reviewed by the Lender's legal department. 

These, and any other requirements, will have already been provided to you in the SMSF Loans Indicative Approval Letter (at Step 1).

Your SMSF Loans Consultant will assist you at each stage and liaise with the Lender, your Solicitor or Conveyancer and other Advisers as required.
7. Contracts Exchanged
When contracts are exchanged between the seller as Vendor and the Security Trustee as Purchaser, the deposit will be paid by the SMSF.  There is no need for the deposit to be paid through the Security Trustee.
8. Loan Documents Issued
The Lender's Lawyers will prepare the loan documents in the ordinary way and send them to the Trustees or their Lawyer / Conveyancer for signature and return.  In most cases the SMSF borrowing structure uses normal loan and mortgage documents with special provisions to provide the limited recourse against the asset.  Many Lenders will require the Trustees (as Guarantors) to have taken independent legal advice and provide a Certificate or verification to that effect.
9. Settlement
The purchase is completed.  After registration of the transfer on the mortgage, the transaction / title documents will be held on behalf of the lender.
You should ensure that your Solicitor (or other Adviser) attends to stamping of the Security Deed as applicable in the State or Territory where the security property is held.