SMSF Loans to Purchase a Storage Facility Investment

Understanding SMSF Loans for Storage Facility Investment

For St John Ambulance employees looking to diversify their retirement savings beyond traditional investments, purchasing a storage facility through a self managed super fund loan presents an attractive opportunity. This tax effective investment strategy allows you to use your superannuation to acquire commercial property while benefiting from concessional tax rates and building long-term wealth.

A storage facility investment offers several advantages for SMSF property investment. These properties typically require less maintenance than residential property, generate consistent rental payments, and can provide reliable income streams for your retirement security. Understanding how SMSF commercial property loans work is essential before proceeding with this investment strategy.

How Limited Recourse Borrowing Arrangements Work

When your super fund borrowing involves purchasing commercial property like a storage facility, the transaction must occur through a Limited Recourse Borrowing Arrangement (LRBA). This structure protects your retirement savings by limiting the lender's recourse to only the property purchased with the loan amount, not your entire super fund balance.

Under this arrangement:

• The property is held in a separate trust until the SMSF loan is fully repaid
• Your SMSF makes regular SMSF repayments from super fund contributions and rental income
• Once settled, the property title transfers to your SMSF
• The corporate trustee manages the investment on behalf of your fund

SMSF Deposit Requirements and LVR for Commercial Property

Storage facilities are classified as SMSF commercial property, which typically requires different deposit requirements compared to SMSF residential property investments. Most SMSF specialist lender institutions require:

• A deposit of 25% to 35% of the purchase price
• Lower loan to value ratio (LVR) than residential investments
• Evidence of adequate super fund balance to cover the deposit and SMSF settlement costs
• Demonstration that the investment aligns with your SMSF investment strategy

SMSF approved lenders generally offer a maximum SMSF LVR of 65-75% for commercial properties, meaning you'll need substantial existing retirement savings or the ability to make additional contributions to meet SMSF deposit requirements.

Interest Rate Options and Repayment Structures

When structuring your SMSF commercial loan for a storage facility, you'll need to choose between principal and interest SMSF repayments or interest only SMSF arrangements.

Principal and Interest Loans:

• Reduce the loan amount over time
• Build equity in your investment property faster
• Generally offer lower interest rate options
• Suitable for SMSFs with strong cash flow

Interest Only Loans:

• Lower SMSF repayments in the short term
• Maximise tax benefits by claiming full interest deductions
• Allow more flexibility for super fund cash flow
• Typically available for 5-10 years before reverting to principal and interest

Your choice depends on your super fund's cash position, contribution capacity, and overall retirement property strategy.

Tax Benefits of SMSF Property Investment

One of the most compelling reasons St John Ambulance employees consider using super to buy an investment property is the favourable tax treatment. Your SMSF pays tax at 15% on rental income and contributions, significantly lower than individual marginal tax rates. When your fund enters the pension phase, this tax drops to 0%.

Additional SMSF tax benefits include:

• Rental income taxed at concessional rates
• Capital gains tax discounted to 10% when held for more than 12 months
• No capital gains tax when sold in pension phase
• Interest and property expenses deductible against fund income

These tax advantages make storage facility investments particularly attractive for wealth building within the superannuation environment.

SMSF Compliance and Property Rules

Operating within SMSF rules and maintaining SMSF compliance is crucial when purchasing commercial property. Your storage facility investment must satisfy the "sole purpose test" - it must be maintained solely to provide retirement benefits.

Key SMSF property rules include:

• The property cannot be leased to you or related parties
• All rental payments must be at market rates
• The investment must align with your documented SMSF investment strategy
• Your SMSF Bank statements must clearly show all transactions
• Regular valuations may be required by SMSF approved lenders

Working with professionals who understand SMSF borrowing regulations ensures your investment remains compliant and your retirement savings stay protected.

The SMSF Loan Application Process

The SMSF loan application process for commercial properties differs from standard home loans. You'll need to provide:

1. Current SMSF financial statements and tax returns
2. Your documented SMSF investment strategy
3. Trust deed confirming borrowing powers
4. Details of the corporate trustee
5. Property valuation and rental appraisal
6. Evidence of deposit funds within the SMSF

SMSF specialist lenders assess the fund's capacity to service SMSF repayments from existing income, contributions, and projected rental payments. The approval process typically takes longer than residential loans due to additional compliance checks.

SMSF Loan Fees and Settlement Costs

Budgeting for all costs associated with your SMSF property loan is essential for protecting your retirement savings. Beyond the standard SMSF loan fees, you'll incur:

• Legal fees for establishing the bare trust
• Stamp duty on the commercial property purchase
• Building and pest inspections
• Property valuation costs
• Ongoing SMSF administration and accounting fees
• Annual compliance and audit costs

These SMSF settlement costs must come from within your super fund, so ensuring adequate cash reserves is vital before proceeding with your SMSF Mortgage application.

Refinancing and Accessing Better SMSF Loan Rates

As your storage facility investment matures and your fund's equity position improves, SMSF refinance options become available. Refinancing your SMSF property loan can help you:

• Secure a lower interest rate
• Access equity for additional investments
• Switch from interest only to principal and interest
• Consolidate multiple super fund borrowing arrangements

Note that most lenders don't offer SMSF offset account options for commercial loans, making the actual interest rate you secure even more important for managing costs.

Control Your Retirement with Strategic Property Investment

For St John Ambulance employees committed to control retirement outcomes through active investment management, storage facilities offer a distinctive opportunity within the SMSF framework. This retirement property strategy combines commercial property stability with superannuation tax advantages.

At Paramedic Loans, we understand the unique circumstances of ambulance workers and can access SMSF Loan options from banks and lenders across Australia. Our team has experience with both SMSF residential property and commercial property acquisitions, helping paramedics and ambulance workers build wealth through strategic property investment.

Whether you're considering your first investment property or expanding your property portfolio, understanding how SMSF Loans work for commercial investments is an important step toward retirement security.

Take Control of Your Retirement Strategy Today

Purchasing a storage facility through your self managed super fund represents a significant decision that requires careful planning and professional guidance. The combination of commercial property income, tax effective investment structures, and long-term capital growth potential makes this strategy worth exploring for St John Ambulance employees serious about wealth building.

Our mortgage brokers specialise in working with paramedics and ambulance workers, providing tailored advice on superannuation loan options that align with your retirement goals. We can help you understand deposit requirements, navigate SMSF compliance obligations, and connect you with SMSF approved lenders offering competitive SMSF loan rates.

Call one of our team or book an appointment at a time that works for you to discuss how an SMSF commercial loan could strengthen your retirement property strategy.