Guide to Using SMSF Loans for Storage Facility Investment

If you're a FIFO truck driver thinking about your retirement savings, you might be wondering how to make your super work harder for you. One option that's worth considering is using your self managed super fund to purchase an investment property - specifically, a storage facility. This could be a smart move for building wealth while enjoying tax benefits along the way.

What is an SMSF and How Does it Work?

A self managed super fund gives you control over your retirement savings. Instead of leaving your super with a traditional fund, you become the trustee and make the investment decisions. This means you can choose to buy property with super, including commercial properties like storage facilities.

When you set up an SMSF, you'll need a corporate trustee to manage the fund according to SMSF compliance requirements and SMSF rules. This structure is essential for accessing SMSF loan options from banks and lenders across Australia.

Why Consider a Storage Facility?

For FIFO truck drivers, a storage facility can make a lot of sense as part of your SMSF investment strategy. Here's why:

• Steady rental income: Storage units typically provide consistent rental payments from multiple tenants
• Lower maintenance: Compared to residential property, storage facilities generally require less hands-on management - perfect when you're on a roster
• Tax effective investment: Income and capital gains within your SMSF are taxed at 15%, which is often lower than your personal tax rate
• Diversification: It's different from traditional SMSF residential property investments
• Long-term wealth building: The property can grow in value while you're working, securing your retirement

Understanding Limited Recourse Borrowing Arrangements

To use super fund borrowing for purchasing a storage facility, you'll need what's called a Limited Recourse Borrowing Arrangement. This is a special type of SMSF property loan that protects your other super assets.

With this arrangement, if something goes wrong and you can't make SMSF repayments, the lender can only claim the property you purchased - not the other assets in your super fund. This is a crucial protection for your retirement security.

SMSF Loan Requirements for Commercial Property

When applying for an SMSF commercial loan to purchase a storage facility, you'll need to meet certain requirements:

SMSF deposit requirements:

• Most SMSF specialist lenders require a deposit of 25% or more for commercial property
• Some SMSF approved lenders might accept a deposit of 20% depending on the property and your fund's position
• The loan to value ratio (LVR) for SMSF commercial property is typically more conservative than residential loans

Documentation needed:

• SMSF Bank statements showing your fund has sufficient funds
• Trust deed and compliance documents
• Details of your corporate trustee
• Property valuation and lease agreements (if tenants are already in place)

Principal and Interest vs Interest Only SMSF Loans

You'll need to decide between two repayment structures:

Principal and interest SMSF: You pay down the loan amount over time, building equity in the property faster. This approach provides better retirement property strategy outcomes as you'll own more of the asset sooner.

Interest only SMSF: You only pay the interest rate portion, keeping SMSF repayments lower. This can help with cash flow, especially in the early years when you're establishing the investment.

Many FIFO workers find interest only repayments helpful initially, then switch to principal and interest later. Some lenders also offer an SMSF offset account, which can help reduce interest costs while maintaining flexibility.

The Application Process

The SMSF loan application process for a storage facility involves several steps:

1. Set up your SMSF: If you don't already have one, you'll need to establish your self managed super fund with a corporate trustee
2. Develop your investment strategy: Document why a storage facility aligns with your SMSF investment strategy
3. Find the right property: Research storage facilities that meet SMSF property rules
4. Get pre-approval: Work with a broker who understands SMSF borrowing to access SMSF loan options from banks and lenders across Australia
5. Complete the purchase: Factor in SMSF settlement costs including legal fees, stamp duty, and building inspections

Costs to Consider

Beyond the deposit and loan amount, budget for:

• SMSF loan fees charged by lenders
• Ongoing SMSF compliance costs for accounting and auditing
• SMSF settlement costs when purchasing
• Property management fees if you're not managing the facility yourself
• Insurance and maintenance costs

These expenses are typically tax deductible within your super fund, providing additional SMSF tax benefits.

SMSF Tax Benefits

One of the biggest advantages of using your superannuation loan for property investment is the tax treatment:

• Rental income is taxed at 15% within your SMSF
• Capital gains on assets held for more than 12 months are taxed at just 10%
• Once you retire and start drawing a pension, investment earnings can be tax-free
• Loan interest and property expenses are tax deductible at the fund level

These SMSF tax benefits can significantly boost your retirement savings compared to buying investment property in your personal name.

Refinancing Your SMSF Loan

As your super fund grows and the storage facility increases in value, you might consider SMSF refinance options. This could help you:

• Access better SMSF loan rates as the SMSF LVR improves
• Release equity to purchase additional investment property
• Switch from interest only to principal and interest repayments
• Consolidate SMSF loan fees and reduce costs

Just like with home loan refinancing for FIFO workers, refinancing your SMSF mortgage can provide significant benefits over time.

Why FIFO Truck Drivers Should Consider This Strategy

Your FIFO income puts you in a strong position to build wealth through property investment. Unlike traditional investment loans for FIFO workers where you use your personal income, an SMSF property loan uses your super contributions to make repayments.

This means:

• You're using pre-tax money (super contributions) rather than after-tax income
• The investment grows in a low-tax environment
• You maintain control over your retirement strategy
• The rental payments from tenants help fund your retirement

Getting Started

Purchasing a storage facility through your SMSF is a significant decision that requires careful planning. You'll need advice from:

• A financial adviser who understands SMSF rules and SMSF property rules
• An accountant experienced with self managed super fund compliance
• A mortgage broker who specializes in SMSF Loans and knows the SMSF approved lenders
• A solicitor to handle the legal aspects of super fund borrowing

At FIFO Home Loans, we understand the unique situation of FIFO truck drivers and how to structure SMSF commercial loans that work with your roster and income. We can connect you with SMSF specialist lenders and guide you through the process of using your super to purchase a storage facility.

Whether you're interested in SMSF residential property or commercial investments like storage facilities, we can help you understand your options and find the right SMSF property loan for your retirement property strategy. We also assist FIFO workers with other financial needs, including mortgages for FIFO workers and expanding your property portfolio.

Taking control of your retirement through SMSF borrowing can be a powerful wealth building strategy. With the right structure and support, a storage facility investment could provide steady income and long-term growth for your super fund.

Call one of our team or book an appointment at a time that works for you to discuss how an SMSF loan could help you secure your financial future.