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Created with Fabric.js 1.4.5 Checklist for consider gearing to invest property through an SMSF CORRECT PROCEDURESEnsure that the required limited recourse borrowing arrangement is correctly established and implemented, with the SMSF being set up before entering a contract to buy. And a geared asset must be held in a separate holding trust until the debt is repaid. Again, see advice to prevent any unnecessarycosts and tax. PROFESSIONAL ADVICEAdvice include whether a gearing strategy is appropriate and complies with the funds investment strategy and its trust deed. If you wish to borrow in your SMSF to buy a property, you needto check the trust deed and governing rules of your SMSF to ensure they allow the fund to borrow. UNDERSTAND WHAT COULD GO WORNGAn SMSF could lose a large amount of'members savings if a geared asset loses value. ADEQUATE INSURANCEFrom 7 Aug 2012, trustees of SMSFs are required to consider the insurance needs of their members as part of the funds investment strategy. Consider taking out an insurance policy over those members of the SMSF whose contributions are critical to the ability of the SMSF being able to make future loan repayment. . HIGH COSTS OF GEARING DIRECT PROPERTYThese include higher loan applicationfee and commercial interest rate for some bank. And also you needto pay valuation fee for the property. CHECK WHETHER IT IS MORE TAX-EFFECTIVE TO GEAR OUTSIDE SMSF Much depends on the circumstances including when the investment is eventually sold. Alternatives include gearing in a members own name, unit trusts and joint ventures. visit for more info
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