Incorrect. Susan and Jeff make a snap decision to buy the property for the SMSF. The fund borrows money to pay for it.

Their auditor reports to the ATO that the loan isn’t a limited recourse borrowing arrangement (LRBA). As they have broken the super laws, the ATO can direct them to sell the property to fix their mistake – which could be very costly for the fund. The property may sell for less than the fund paid for it, and there are always expenses associated with buying and selling property.

Susan and Jeff are fined thousands of dollars – which they must pay out of their own pocket.

The ATO can also make the fund non-complying which means their fund will be taxed at the highest marginal tax rate.

One careless investment decision means Susan and Jeff may need to postpone their retirement.

Correct. Susan and Jeff are very keen to buy the property for the SMSF.

They first confirm that purchasing the property aligns with their SMSF investment plan.

They know there are a lot of rules about borrowing.

Before buying the property, they work with their adviser and the bank to meet the strict rules required of a limited recourse borrowing arrangement (LRBA) .

The fund is audited with no issues to report.

Susan and Jeff’s SMSF continues to grow, and their retirement plans are looking good!

If you are thinking about borrowing money through your fund, first make sure you understand all the rules or consider speaking with an SMSF professional to get some advice.