Step by step guide to SMSF borrowing
Thank you for considering using Cleardocs to arrange your SMSF borrowing documents.
By using Cleardocs to arrange your SMSF borrowing documents, you get the benefit of:
- ensuring your SMSF deed is compliant with current superannuation law;
- a complete supplement package to the lender's transaction documents;
- documents that are tailored to meet the requirements of your particular bank or lender; and
- documents that are signed off by our lawyers at Maddocks. Our relationship with Maddocks allows you to utilise the free legal helpline we
arrange through Maddocks and to use extra services of Maddocks to adjust your borrowing documents to suit particular circumstances.
Step by step guide to SMSF borrowing You can use the information below to work out how to arrange the documents for SMSF
borrowing through Cleardocs.
The table below explains the full requirements — in summary, here's what you need:
- Step 1: an SMSF;
- Step 2: the SMSF needs a deed with suitable borrowing provisions;
- Step 3: sometimes, the SMSF needs a company as its trustee — check with the lender;
- Step 4: usually, the Declaration of Custody Trust (also known as a Bare trust) for the SMSF borrowing needs a company as its
trustee — check with the lender. That company must be a different company from the one that is the SMSF trustee — so you may need
two companies; and
- Step 5: an SMSF borrowing document package which includes the Declaration of Custody Trust.
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Step
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What do you need?
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Where is there more information?
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Solution: How to complete this step
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How much will it cost?
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Step 1
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A Self-Managed Superannuation Fund (or SMSF)
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An SMSF
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You can read about setting up an SMSF through Cleardocs here.
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You can order an SMSF here.
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SMSF set up
- $165.00 (inc. GST)
- Optional printing, binding and courier delivery an extra $78.65 (inc. GST)
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Step 2
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An up-to-date Cleardocs SMSF deed
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The SMSF should have a Cleardocs deed to ensure that it works with the Cleardocs SMSF borrowing package.
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The Cleardocs deed must be from on or after 7 July 2010 (that is, version 11 or later) – that date matters as the law
about SMSF borrowing changed that day and the Cleardocs deed was updated to reflect that change.
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If the SMSF does not have a Cleardocs deed, you must seek legal advice to ensure that the deed permits the trustee to enter into the
limited recourse borrowing arrangement and satisfies the lender's requirements.
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- You can check whether the SMSF has a Cleardocs deed by asking the person who arranged the deed for you.
- If the SMSF has a Cleardocs deed, then you can check which version it has by:
- logging in at Cleardocs;
- clicking the blue button "MySMSFs" in the second row of buttons at the top of the home page;
- finding the relevant SMSF in the list; and
- viewing the light blue "Version X of Y" button in the second column headed "Version".
You can read about updating the deed to a Cleardocs deed here.
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You can arrange for the SMSF to up-date to the latest version of the Cleardocs deed here. You can do that:
- even if the SMSF does not have a Cleardocs deed; and
- if the SMSF has an old Cleardocs deed.
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SMSF deed update
- $147.40 (inc. GST)
- Optional printing, binding and courier delivery an extra $78.65 (inc. GST)
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Step 3
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The trustee of the SMSF
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Some lenders require the SMSF to have a company as its trustee.
This is a requirement of the banks. Other lenders may not require it. You should check with the lender.
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If the SMSF has individuals as its trustee, then:
- if you need a new company to be the trustee, you can read about using Cleardocs to register a company here; and
- you can read about using the Cleardocs SMSF Change of Trustee document package to replace the SMSF's individual trustees with a company
trustee here. To use that document package, the SMSF must have a Cleardocs
deed — any version is acceptable. You can read about changing the SMSF's deed to a Cleardocs deed here.
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You can order the document package:
- to update the SMSF's deed to a Cleardocs deed here;
- to register a new company to be the trustee here; and
- to change the SMSF's trustee to a company here.
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SMSF deed update
- $147.40 (inc. GST)
- Optional printing, binding and courier delivery an extra $78.65 (inc. GST)
Company registration
- $740.00 (including ASIC registration fee of $597.00 and GST)
- Optional printing, binding and courier delivery an extra $78.65 (inc. GST)
Change of SMSF Trustee
- $173.80 (inc. GST)
- Optional printing, binding and courier delivery an extra $78.65 (inc. GST)
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Step 4
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The trustee of the Declaration of Custody Trust
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Often, the lender requires the trustee of the Declaration of Custody Trust (also known as a "Bare Trust") to be a company – you
should check with the lender.
Importantly, if you do need a corporate trustee for the Declaration of Custody Trust, then that company must be a different company from
the one that is the SMSF trustee.
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If you need a new company, you can read about using Cleardocs to register a company here.
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You can order the document package to register a new company to be the trustee of the Declaration of Custody Trust here.
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Company registration
- $740.00 (including ASIC registration fee of $597.00 and GST)
- Optional printing, binding and courier delivery an extra $78.65 (inc. GST)
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Step 5
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The SMSF borrowing document package — including the Declaration of Custody Trust (or Bare Trust)
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You need to arrange a Declaration of Custody Trust (or Bare Trust) and some related documents.
Cleardocs has two separate SMSF borrowing packages:
- one for borrowing from a bank; and
- one for borrowing from a related party.
These documents set out the borrowing arrangement between:
- the lender;
- the SMSF trustee(s); and
- the Custodian — that is, the trustee of the Declaration of Custody Trust.
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You can read about the document package:
- for borrowing from a bank here; and
- for borrowing from a related party here.
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You can order the document package:
- for borrowing from a bank here; and
- for borrowing from a related party here.
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SMSF borrowing from a bank
- $247.50 (inc. GST)
- Optional printing, binding and courier delivery an extra $78.65 (inc. GST)
SMSF borrowing from a related party
- $667.15 (inc. GST)
- Optional printing, binding and courier delivery an extra $78.65 (inc. GST)
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Any questions?
If you have any questions:
- about how to use Cleardocs, contact the Cleardocs helpdesk on 1300 307 343.
- about legal issues, contact the Cleardocs helpdesk on 1300 307 343. If you need advice, we will arrange for you to speak
to 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.
Thank you for using Cleardocs.
Step by step guide to SMSF borrowing
Get SMSF borrowing document requirements in 5 steps with
this guide
What description for the custodian's capacity should I use?
In contracts
If the custody trust itself has a name, then insert, for example:
- if individual trustee "John Smith as trustee of the [## insert name of custody trust]"
- if corporate trustee "John Smith Pty Ltd ACN ## as trustee of the [## insert name of custody trust]"
However, there are two further things to bear in mind:
In land registry forms
Most land registries will not accept any reference to a custodian or trustee capacity. Therefore, the transfer of land should simply be
registered in the custodian's legal name, for example:
- if individual trustee "John Smith"
- if corporate trustee "John Smith Pty Ltd ACN ##"
In share registry forms
Share registries do not accept any reference to a "trust" or "fund". So shares held on trust are generally registered as "John Smith Pty
Ltd ACN ## <John Smith Super Account>" or "John Smith Pty Ltd ACN ## <John Smith Custody Account>".
When should I sign the contract for sale and what details do I use for the contract?
You can read our ClearLaw article about the requirements here.
Can a person or entity be custodian of more than one custody trust for an SMSF?
While you can have more than one custody trust for your SMSF, our lawyers at Maddocks do not recommend one person or entity being custodian
under more than one custody trust. While this is not forbidden by superannuation law, it may lead to confusion and/or a conflict of interest
for the custodian, who will have a separate set of responsibilities in relation to each custody trust.
It may also not be acceptable to the lender. You should check with the lender prior to appointing a person or entity as a custodian of more
than one custody trust.
Do the Cleardocs SMSF Borrowing (bank) documents allow for fixed or variable interest rates?
The Cleardocs SMSF borrowing documents — for when the lender is a bank — are suitable for a loan with a fixed
interest rate or a variable interest rate. The arrangements about the interest rate will be in the loan documents, which the bank provides.
Do the Cleardocs SMSF Borrowing (related party) documents allow for fixed or variable interest rates?
The Cleardocs SMSF borrowing documents — for when the lender is a related party — are suitable for a loan with a fixed interest
rate or a variable interest rate.
If the loan has a variable interest rate, then here's what to do:
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You order the normal Cleardocs SMSF Borrowing (related party) document package — when the system asks you "Will the lender
and the borrower be able to vary this interest rate by agreement?", answer "Yes".
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The Cleardocs system will insert the applicable interest rate at the date the documents are ordered as a fixed rate. Your document package
will include an Agreement to vary Interest Rate.
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As the interest rate changes, the parties can separately document the change in writing using the Agreement to vary Interest Rate. The
parties can vary the interest rate as many times as they wish, but they need to separately document each change in writing.
Do the Cleardocs SMSF Borrowing (bank) documents allow for an interest only loan?
The Cleardocs SMSF borrowing documents — for when the lender is a bank — are suitable for an interest only loan. The
arrangements about what is being repaid will be in the loan documents, which the bank provides.
Do the Cleardocs SMSF Borrowing (related party) documents allow for an interest only loan?
Yes, the Cleardocs SMSF borrowing documents — for when the lender is a related party — are suitable for both:
- a loan in which both the interest and the capital will be repaid; and
- a loan with an "interest only" period, that is, a loan with a period during which the borrower is only required to repay interest (and not
capital).
For a loan with an "interest only" period, answer "Yes" on the question interface to this question:
"Will there be a period when the borrower is required to pay only interest (and not to repay capital)? That is will the loan be "interest only"
for a certain period?".
You can then select the length of the "interest only" period (which can be up to 5 years but not longer than the loan term) and whether the
borrower can
capitalise interest payments. The Cleardocs system will tailor your loan documents to reflect the borrowing arrangements.
I want to make changes to signed SMSF borrowing (bank) documents — what do I do?
If you wish to vary a Cleardocs Declaration of Custody Trust (Custody Trust Deed) that you purchased as part of the Cleardocs SMSF borrowing (bank) document package and the Custody Trust Deed has been executed, you can create a deed of variation of the custody trust through Cleardocs. That document package covers a change in:
- lender; and/or
- any other details in the schedule to the Custody Trust Deed (such as the details of the authorised investment or the loan amount).
If you wish to vary the SMSF borrowing (bank) documents for any other reason than a change in lender or change in details of the authorised investment (for example, to address the Custody Trust Deed being incorrectly executed or dated), you must seek your own legal advice about this. You are welcome to use our lawyers at Maddocks for obtaining this advice — they will charge for their time as this is not part of the free legal helpline we arrange through Maddocks.
10-15 minutes
Optional printing, binding and delivery - from $78.65 (including GST)
The master documents are written in plain language and are signed-off by our lawyers at Maddocks.
