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Superannuation
Superannuation (SMSF) document

SMSF borrowing (bank)

Use Cleardocs to create your SMSF borrowing (or "limited recourse borrowing") documents. This document package is suitable for when the lender is a bank and can be used to facilitate borrowing for SMSF property and other asset purchases.

Cleardocs also offers an SMSF borrowing package for when the lender is a related party of the SMSF's trustee(s) or is a third party (but not a bank).

$231.00
  • (incl GST) for an SMSF with a Cleardocs deed $231.00
  • (incl GST) for an SMSF without a Cleardocs deed $302.50
Product Benefits
  • The documents are tailored to each major bank's specific requirements
  • Pre-population of Fund information from previous Cleardocs orders or your existing BGL account
  • Allows for fixed or variable interest rate loans
  • Vary your custody trust deed using the Cleardocs Amendment to SMSF borrowing package
  • Copy function for address details
  • Extensive online help and local phone support
Product Information

What documents are included in the Cleardocs limited recourse borrowing arrangement (bank) package?

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

What information do you need to order a SMSF borrowing (bank) or LRBA document package through Cleardocs?

Download our checklist of information required to order a Cleardocs limited recourse borrowing document package for when the lender is a bank.

The fund does not require an underlying Cleardocs deed

To use a Cleardocs limited recourse borrowing document package, the SMSF does not require a Cleardocs deed. We strongly recommend that you update to the latest version of the Cleardocs deed — this is to make sure that the borrowing documents "match" the fund's deed.

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

If you do not want to update to the latest Cleardocs deed, you must seek legal advice about the suitability of the limited recourse borrowing arrangement for your circumstances to ensure that:

  • your SMSF deed permits the trustee to:
    • borrow money for the purpose of entering into a limited recourse borrowing arrangement;
    • charge (that is, grant security over) the assets of the SMSF; and
    • appoint a custodian to hold the acquirable asset; and
  • the lender has reviewed and is happy with the borrowing provisions in your SMSF deed.

What the SMSF borrowing package does not include

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
  • 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.

Overview of limited recourse borrowing arrangements

The interactive graphic overview tells the story visually. It includes a diagram of how limited recourse borrowing arrangements work for SMSF borrowing including:

  • the parties involved;
  • the documents involved;
  • the asset's journey to the SMSF Trustee(s); and
  • each document's role.

This article analyses limited recourse borrowing arrangements for SMSF borrowing.

TheCleardocs information sheet provides a step-by-step guide to arranging your SMSF borrowing documents through Cleardocs.

The Banks' requirements

We tailor our SMSF borrowing documents after feedback and discussion with the banks. As far as we know, our standard documents meet the requirements of all major lenders. On our interface, we ask you which bank is the lender so we can tailor the documents accordingly.

You need:

  • to be aware that from time-to-time the banks change their requirements for the documents for SMSF borrowing; and
  • to remember that when the bank reviews the documents, it is doing so to protect its own interests — so some of the bank's requests may not be in the interests of the SMSF, or its trustee(s), or member(s), etc. Indeed, our lawyers at Maddocks have seen some requests by banks that, if implemented, may cause the relevant SMSF to be in breach of superannuation law.

Maddocks makes sure that the master documents we use to provide documents to you comply with superannuation law.

You need to arrange your own legal advice about your bank's requirements — whether those requirements:

  • are changes to the documents we provide; or
  • are contained in documents the bank provides.

You are welcome to use our lawyers at Maddocks to review a bank's requirements. But the firm will charge for its time as this sort of work is not part of the free legal helpline we arrange through Maddocks.

Can I make changes to a signed Cleardocs custody Trust deed?

Each lender has their own requirements for custody trust deeds, and preferred process for addressing any issues.

The lender will likely require you to obtain a Deed of Variation to vary your existing Cleardocs Declaration of Custody Trust (Custody Trust Deed) to conform with their requirements.

The Cleardocs Amendment to SMSF borrowing product includes a deed of variation to vary your existing Cleardocs Custody Trust Deed to:

  • fix or update any errors in the schedule of your Cleardocs Custody Trust Deed, including the asset details, loan details and/or settlement date;
  • change the lender, if required; and
  • bring it in to line with the requirements of certain major lenders.

Auto-populate answers using your existing BGL account

Integration with BGL Simple Fund 360 allows you to pre-populate your Cleardocs orders with existing BGL fund information. In order to pre-populate your answers, start a new order on the Cleardocs website and then click on "Use details from BGL Simple Fund 360" when the question interface gives you the option to auto-populate your answers.

The Cleardocs system then:

  • directs you to the BGL website to log in with your credentials and authorise Cleardocs to access your fund information;
  • returns you to the Cleardocs interface and prompts you to choose your preferred BGL document fund from a drop down box; and
  • pre-populated the interface with your BGL fund information.

For privacy reasons, Cleardocs does not have access to any of your BGL login details. BGL only provides Cleardocs with certain contact information.

You will need legal advice

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

  1. The Limitations of this Pack As this Pack does not include the transaction documents described, 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 Superannuation Industry (Supervision) Act 1993 (Cth), 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, New South Wales or ACT, 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

Cleardocs has an extensive library of information on SMSF limited recourse borrowing arrangements - please search our ClearLaw and blog library.

Frequently Asked Legal Questions

Cleardocs is not a law firm. So as with all the legal material on this site, the answers to these "frequently asked legal questions" are provided by the law firm Maddocks. Cleardocs does not endorse those answers.

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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?

  1. In contracts

  2. 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:

  3. In land registry forms

  4. 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 ##"
  5. 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:

  • 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".
  • 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.
  • 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.


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