Aspira SMSF Property Trust: A Strategic Solution for Joint Property Investment

By Jaye Mankelow

For business owners interested in using their Self-Managed Superannuation Funds (SMSFs) to invest in commercial property, the Aspira SMSF Property Trust offers a unique and collaborative approach. This structure allows unrelated SMSF investors to pool resources and jointly purchase property through a geared unit trust, providing potential for lower borrowing rates and greater asset protection than an SMSF might achieve on its own with a Limited Recourse Borrowing Arrangement (LRBA). Here’s a closer look at how the Aspira SMSF Property Trust works and its advantages.

1. What is the Aspira SMSF Property Trust?

The Aspira SMSF Property Trust is a property unit trust designed for unrelated business owners who want to invest in commercial property together through their SMSFs. This structure allows each SMSF to acquire units in the trust, creating joint ownership without direct property ownership, which simplifies management, tax benefits, and provides opportunities for leveraging the trust’s borrowing power.

2. How the Aspira SMSF Property Trust Works

In the Aspira SMSF Property Trust model, two or more business owners each use their SMSFs to purchase units in the trust, allowing for a joint investment in a commercial property. Here’s how it’s structured:

• Unit Allocation: Each SMSF purchases units proportional to its desired share in the property. For example, two unrelated business owners could each buy a 50% interest in the property by acquiring half of the units in the trust.
• Trust Borrowing Capacity: Unlike SMSFs using an LRBA, the Aspira SMSF Property Trust itself can take out a loan, using the property as security. This allows for direct borrowing by the trust, which can often result in more favourable terms and interest rates than an LRBA, making it more cost-effective.
• Contribution and Borrowing Ratio: Typically, each SMSF contributes around 15% of the property’s purchase price (totalling a 30% contribution), and the trust borrows the remaining 70% from a bank. This structure allows both SMSFs to leverage their investment collectively, benefiting from potentially lower interest rates than an individual LRBA.

Diagram Key:

1. SMSF A and SMSF B: Each owns 50% of the trust by purchasing units.
2. Property Ownership and Bank Loan: The trust borrows 70% of the property’s cost directly from a bank, with each SMSF contributing 15% of the total purchase price as equity.

3. Unique Scenario: SMSFs Holding 50/50 Units with Geared Investment

One of the primary advantages of the Aspira SMSF Property Trust is that it enables unrelated SMSFs to hold equal (or agreed) unit shares while also accessing debt financing through the trust. This structure allows both SMSFs to benefit from the property’s growth potential and rental income without each taking out individual loans:

• Collaborative Investment with Leverage: The Aspira SMSF Property Trust structure allows each SMSF to hold units while the trust itself secures financing, often with better terms than an SMSF would individually. This approach enables joint ownership with leverage, allowing both SMSFs to achieve higher returns from a larger investment than they might alone.
• Tax-Efficient Income Distribution: Rental income and any capital gains are distributed in proportion to each SMSF’s unit holding, providing tax advantages within the superannuation environment.
• Simplified Compliance and Reduced Costs: The trust manages the loan and property maintenance, reducing the administrative burden on each SMSF, which is otherwise required to comply with the complexities of LRBAs.

4. Benefits of the Aspira SMSF Property Trust Strategy

This structure offers SMSF investors access to unique benefits that may not be available through a direct SMSF property purchase:

• Lower Interest Rates and Favourable Loan Terms: The Aspira SMSF Property Trust can borrow directly, avoiding the higher interest rates and stricter terms that SMSFs often face under LRBAs, which can make the investment more affordable.
• Enhanced Flexibility and Control: Each SMSF can adjust its unit holdings over time, allowing investors to exit or reinvest as their strategies evolve, while retaining the flexibility of co-ownership.
• Asset Protection: Since the trust holds the debt rather than the individual SMSFs, the arrangement shields each SMSF’s other investments from direct risk, enhancing asset protection.

The Aspira SMSF Property Trust offers a streamlined way for unrelated SMSFs to jointly invest in commercial property with geared investment, leveraging the trust’s borrowing power to access lower interest rates and added flexibility. 

This collaborative approach provides business owners with tax efficiencies, simplified management, and enhanced protection for SMSF assets.

If you’re interested in exploring whether the Aspira SMSF Property Trust aligns with your investment goals, our team at Aspira is here to guide you through the process and help you take advantage of this unique structure.

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