LRBA loan agreement
Limited recourse borrowing arrangement loan agreement.
Important information
The LRBA loan agreement is manually processed by our legal team. Please allow a three day turnaround to complete this order.
This loan agreement is for self managed superannuation funds that intend to borrow funds to purchase a property. A limited recourse borrowing arrangement requires an SMSF trustee to take out a loan from a third party lender. The trustee then uses those funds to purchase a single asset (or collection of identical assets that have the same market value) to be held in a separate trust. Any investment returns earned from the asset go to the SMSF trustee. If the loan defaults, the lender's rights are limited to the asset held in the separate trust. This means there is no recourse to the other assets held in the SMSF.
The law does not prohibit the lender from being a related party. However, SMSFs must continue to comply with other legislative requirements. For example, the SMSF must satisfy the sole purpose test and comply with existing investment restrictions such as those applying to in-house assets and prohibitions on acquiring certain assets from a related party of the fund. All arrangements under the limited recourse borrowing arrangement must be in compliance with sections 67A, 67B and 71(8) of the Superannuation Industry (Supervision) Act 1993 (SIS Act). It is important that you seek legal and financial advice before entering into a limited recourse borrowing arrangement. We do not accept liability and are not liable for ensuring that the proposed arrangements are in compliance with the relevant provisions.
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