Latest Financial Planning News
Hot Issues
Super growth reducing age pension drawdown
Big four firm outlines new financial year checklist for SMSFs
Asset allocation as you age
Australia - the story goes on.
Consolidate your super and save
Critical documentation steps flagged with switching SMSF loans
Good investment habits versus damaging biases
Control considerations flagged with death benefit pensions for children
Interest rate for SMSF loans set to rise under safe harbour terms
Recession on our mind
What it will take to close the super gap between men and women
Australia - How are we going as 2018-19 ends?
LRBAs, guarantees in need of review after property market falls
Average age for establishing SMSFs sitting at 48.9: Report
ATO updates valuation guidelines for pension reporting
ATO figures show jump in starting balances for SMSFs
Your personal financial register
Australia’s $4bn Super blackhole impacting self-employed most
The proper help can be a benefit - age pension
SMSFs on ATO’s radar in cryptocurrency review
Limited recourse borrowing arrangements - LRBAs
What a financial planner does to help.
Goodbye to ad-hoc portfolios
Wanted: More voluntary super contributions
Australia by the numbers – May Update
Federal Budget 2019 - Overview
How the 2019 Federal Budget affects you
The problem with getting to 53 years of age.
Paying for health care in retirement
Personal super contributions and the 10% test
Articles archive
Quarter 2 April - June 2019
Quarter 1 January - March 2019
Quarter 4 October - December 2018
Quarter 3 July - September 2018
Quarter 2 April - June 2018
Quarter 1 January - March 2018
Quarter 4 October - December 2017
Quarter 3 July - September 2017
Quarter 2 April - June 2017
Quarter 1 January - March 2017
Quarter 4 October - December 2016
Quarter 3 July - September 2016
Quarter 2 April - June 2016
Quarter 1 January - March 2016
Quarter 4 October - December 2015
Quarter 3 July - September 2015
Quarter 2 April - June 2015
Quarter 1 January - March 2015
Quarter 4 October - December 2014
Critical documentation steps flagged with switching SMSF loans

With an increasing number of SMSF clients looking to switch loans following the exodus of the major banks from SMSF lending, a law firm has highlighted some of the considerations and important steps with documentation in this process.



           


 


Last year, the last few major banks that were still offering SMSF loan products decided to withdraw their products for residential property for new customers. Banks such as AMP and Macquarie also decided to exit the SMSF lending space.


As a result, some of the non-bank or second-tier lenders are now seeing increased demand from SMSF trustees who are looking to refinance their loan.


With the recent changes in the SMSF lending landscape, Townsends Business and Corporate Lawyers said some SMSF clients are deciding to remove and replace the current custodian of the holding trust with a new corporate custodian.


The law firm explained there are a number of important considerations and steps when completing this process.


It gave an example of John and Mary who acquired a residential property in NSW using their SMSF under a limited recourse borrowing arrangement (LRBA).


“The finance was provided by one of the big four banks.” said Townsends.


“The first point of reference for John and Mary would be to review the current bank finance trust deed to determine whether the trust deed permits the resignation of the current custodian and the appointment of a new custodian; otherwise, the holding trust deed may need to be amended to effect this.”


The couple would then need to work out whether authorisation is required from their lender in order to change the trustee of the holding trust.


“Holding trust deeds prepared by the banks often limit the custodian company to a company incorporated by the bank,” Townsends noted.


“In John and Mary’s case, this means that they may be required to seek confirmation from the Bank that it would be prepared to execute any necessary documents to remove the current custodian company and replace it with a new corporate custodian.”


They would also need to consider whether the removal and appointment of the trustee of the holding trust may be considered as a resettlement of trust, and also whether the Deed of Removal and Appointment may need to be registered on the local state general register. Townsends said this will depend on the state or territory laws that apply to the deed.


“In Mary and John’s case, the law that applies to the deed is the law of NSW, and it is likely that the Bank they borrowed form will require that the Deed of Removal and Appointment be registered in order to transfer legal title of the property from the current custodian to the new custodian,” it said.


“John and Mary could consider discharging the current mortgage in order to remove the current custodian as mortgagor and to register a new mortgage with a new custodian as the mortgagor.”


 


Miranda Brownlee
14 June 2019
smsfadviser.com


 




13th-July-2019
 

Investorplan is an Authorised Representative of GWM Adviser Services Limited trading as MLC Financial Planning | ABN 28 056 426 932 | an Australian Financial Services Licensee with its Registered Office at 105-153 Miller Street North Sydney NSW 2060
email: ownyourfuture@investorplan.com.au
General Advice Warning | Terms & Conditions | Legal Statement | Privacy Policy |Site by PlannerWeb