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Maddocks The legal information and commentary on this site is general only. Documents ordered through Cleardocs affect the user‘s legal rights and liabilities. To assess their suitability for the user, legal, accounting and financial advice must be obtained.

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SMSF borrowing (related party) Resources
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Self Managed Superannuation Fund Borrowing — what's involved, and how to set up the legal documents

July 2010: Change of name for SMSF Borrowing: "Instalment warrant borrowing" now called "limited recourse borrowing"

On 7 July 2010, the law about SMSF borrowing changed in various ways. One of those changes was that "instalment warrant borrowing", is now called "limited recourse borrowing". The two names broadly refer to the same arrangement.

You can read an article here about the changes. The article sets out:

  • when Cleardocs documents were updated to reflect the changes;
  • which version of the Cleardocs deed is required for SMSF borrowing; and
  • what needs to be done for existing orders.

Two Cleardocs limited recourse borrowing document packages: one for "bank lender", one for "related party lender"

Cleardocs enables you to create 2 different document packages for SMSF borrowing ("limited recourse borrowing arrangements") — as allowed under Section 67A of the Superannuation Industry (Supervision) Act 1993.

The 2 Cleardocs limited recourse borrowing document packages are different depending on whether:

  • the lender is a related party of the SMSF's trustee(s) or is some other third party (but not a bank); or
  • the lender is a bank — after feedback from the banks, we tailor our SMSF borrowing documents to reflect our understanding of the legal requirements of NAB, Westpac, and ANZ. As far as we know, our standard documents meet the requirements of all other lenders, On our interface, we ask you which bank is the lender so we can tailor the documents if necessary. The rest of this page describes each of these document packages.

The rest of this page describes each of these document packages.

Overview of limited recourse borrowing arrangements

An article here analyses limited recourse borrowing arrangements for SMSF borrowing.
The interactive graphic overview here tells the story visually.

There is considerable overlap between the graphic and the article. But the best place to start is the graphic which includes:

  • A diagram of how limited recourse borrowing arrangements work for SMSF borrowing
    • — the parties involved
    • — the documents involved
    • — the asset's journey to the SMSF Trustee(s)
    • — each document's role
  • The 2 alternate Cleardocs document packages: for a loan from a "bank lender", or a "non-bank lender"
  • More information and next steps

Cleardocs deed required for Cleardocs limited recourse borrowing document packages

To use a Cleardocs limited recourse borrowing document package, the SMSF must have a Cleardocs deed which was created or updated on or after 31 January 2008. However, since that time the deed has been modified to reflect feedback from the banks. The latest version of our deed — which meets all the banks' requirements that we know about — was implemented on 4 May 2009.

So if the lender to your SMSF is a bank, then the process with the bank is likely to go more smoothly if the SMSF has a deed that was created, or last updated, after 4 May 2009.

You can update the SMSF's to a Cleardocs deed — or to the latest version of the Cleardocs deed — here for $99.

What the SMSF borrowing document packages include

Bank lender package Related party lender package

The limited recourse borrowing document package for SMSF borrowing when the lender is a bank includes:

  • Declaration of Custody Trust
  • Compliance Letter
  • Trustee Minutes
  • Establishment Kit

Order the bank lender document pack

The limited recourse borrowing document package for SMSF borrowing when the lender is a related party includes:

  • Declaration of Custody Trust
  • Loan Agreement
  • If the asset being purchased is not land, an Equitable Share & Unit Charge
  • Compliance Letter
  • Trustee Minutes
  • Establishment Kit

Order the related party lender document pack

All our master SMSF borrowing documents are signed-off by our lawyers at Maddocks.

What the SMSF borrowing document packages do not include

Bank lender package Related party lender package

The limited recourse borrowing document package for SMSF borrowing when the lender is a bank:

  • does not include the loan documents that the bank will provide (that is, the loan agreement or the mortgage or charge); and
  • does not include the transaction documents (for example: a transfer of land form or the relevant contract) for transferring the asset that the SMSF trustee(s) are using the loan money to buy.

Order the bank lender document pack

The document package for SMSF borrowing when the lender is a related party does not include the transaction documents for transferring the asset that the SMSF trustee(s) are using the loan money to buy — those documents include, for example: a transfer of land form, the relevant contract, or (if the asset being bought is land) a mortgage.

Order the related party lender document pack

What information do you need to order a limited recourse borrowing document package for SMSF borrowing?

You can download our checklist of the information required to order a limited recourse borrowing document package for SMSF borrowing here.

You will need legal advice

To use either document package, the fund must obtain legal advice. Legal advice is required for two primary reasons:

What the pack does not include

  1. The Limitations of this Pack As this Pack does not include the transaction documents described in the 'What the pack does not include' table above, you need legal advice to arrange those documents.
  2. SMSF Compliance with Superannuation Law Although this Pack provides documents which will satisfy the requirements of Section 67A of the SIS Act, the 'limited recourse borrowing arrangement' must otherwise be in compliance with all the requirements of superannuation law. A lawyer can advise on these matters

If you do not have a lawyer then you are welcome to call the lawyers at Maddocks, who:

  • if you are in Victoria or New South Wales, will give you a quote for the work; or
  • if you are in another state or territory, will refer you to its affiliated firms.

More information about SMSF limited recourse borrowing arrangements

For more information about limited recourse borrowing arrangements and SMSF borrowing, you can:

Order the bank lender document pack

Order the related party lender document pack

Questions or further information

If you have questions:

  • about how to use Cleardocs, contact the Cleardocs helpline on 1300 307 343.
  • about legal issues, contact the Cleardocs helpline on 1300 307 343. If you need advice, we will arrange for you to speak with a lawyer at Maddocks. The firm provides a free legal helpline in relation to the documents Cleardocs provides. If you require other legal advice in relation to your particular circumstances, then this will be charged for.

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