There are a few key reasons why the deposit for a property purchased by an SMSF using a limited recourse borrowing arrangement (LRBA) under section 67A of the SIS Act needs to be paid directly from the SMSF:
1. To comply with superannuation law requirements:
The SMSF must be the entity acquiring the beneficial interest in the property under an LRBA. Paying the deposit directly from the SMSF demonstrates that the SMSF is the purchaser and beneficial owner[1].
2. To maintain the integrity of the LRBA structure:
The LRBA rules require that the borrowed funds are used to acquire a single acquirable asset. Having the SMSF pay the deposit helps show the entire purchase price (deposit + borrowed amount) was used to acquire that single asset[2].
3. To avoid potential compliance issues:
If the deposit was paid from another source (e.g. members personally), it could be viewed as a contribution to the fund or create other compliance problems, including double stamp duty. Paying directly from the SMSF avoids these risks[3].
4. To satisfy lender requirements:
Many lenders will require evidence that the deposit came from the SMSF's own resources as part of their lending criteria for SMSFs[4].
5. To qualify for stamp duty concessions:
Some states offer stamp duty concessions for SMSF property purchases. Proving the deposit came from the SMSF may be required to claim these concessions[2].
In summary, having the SMSF pay the deposit directly helps ensure the LRBA complies with superannuation laws, maintains its intended structure, avoids compliance issues, satisfies lenders, and may be necessary for stamp duty purposes. It's an important step in properly establishing an LRBA for an SMSF property purchase.
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