With more than 10% of SMSF’s having an LRBA, as an Accountant or Adviser you have a ready market if you are willing to invest your time to understand LRBA’s well and to learn how best to service SMSF’s who have them.
By investing via an LRBA, an SMSF can utilise leverage to increase its investment base. A popular strategy among the many SMSFs with LRBA’s is to purchase their business premises by using their existing super together with borrowings.
As a favoured investment among Australians, residential property purchases via LRBA’s are also popular.
With property being illiquid, many SMSFs take a buy and hold approach, so it is typical for LRBA structures to be in place for many years. By making them a core part of your SMSF service offering you can help future proof your accounting or advisory business.
Key components of an LRBA Service Offering to SMSFs
SMSF and LRBA Advice capability or Referral option
Some clients start SMSFs with the goal of setting up an LRBA so the two structures are set up in tandem. Other clients have existing SMSFs and become interested in utilising LRBAs and the structure is set up after the SMSF. If you have the ability to advise on both SMSF and LRBA Establishment you can deal with any client wanting an LRBA. This might take the form of you providing the advice if you are a licenced financial planner, referring the client to a licenced financial planner or seeking a digital advice solution.
Specialist SMSF Lawyer to provide LRBA related documents
It usually works best to have LRBA documents ready for signing ahead of finding a property so that everything happens in a compliant way and your client doesn’t end up with adverse stamp duty outcomes.
In most cases, the financier’s lawyers will scrutinise the LRBA documents so sourcing them from a lawyer rather than off the shelf, means it is easier to direct any questions the financier may have directly to the lawyer. Delays with property purchases can result in interest being paid or in the worst case scenario the purchase falling through.
As well as documenting the LRBA establishment, the lawyer can advise on stamp duty matters, provide lease agreements, loan agreement and vesting documents, meaning you have access to a service that caters for all legal aspects relating to the LRBA.
You may want to have a relationship with a conveyancer too so you have oversight over that aspect of your client’s purchase too.
LRBA Loan capability or Referral option including refinancing
Major bank lenders exited from the LRBA market several years ago so you need to be in touch with second tier lenders. Again you may have the capability in house through your dealer group, your self licenced supplier group or you may look at setting up a referral either directly to a specialised lending group or by seeking a digital lending solution.
For related party loans, you are best placed to utilise a specialist lawyer who can ensure that the safe-habour requirements are properly dealt with.
Buyers Agent Referral option
Having a relationship with a Buyers Agent can help your clients find the property that is right for them. The Buyers Agent is engaged to understand what your client is wanting to achieve from their property purchase, analyse the property market, find them a suitable property and negotiate the purchase.
Market Valuation Report service
Your client may need a market valuation report before they buy the property if it is a business real property they are buying from themselves. An SMSF is required to transact on an arms-length basis and the report is used to properly substantiate that the purchase price complies with this requirement.
Each year the SMSF is required to revalue any property held so that it is recorded at market value in the Financial Statements.
You can subscribe to online property valuation services for both residential and commercial property or you may put in place an arrangement with a service provider who offers this. In some cases, SMSF Administrators or Auditors offer this as a complementary service.
Tax Depreciation Report provider
A tax depreciation expert can appraise your client’s property to determine if it makes sense to generate a tax depreciation report. These reports can provide valuable deductions to your SMSF clients.
There are many providers available offering this service so it is about finding the provider who works in best with your business.
SMSF Administration Service
It is crucial to find an SMSF Administration Service provider that can help make your LRBA offering profitable. There’s a lot of paperwork involved in owning a property so using a provider who actively streamlines this for you can save you lots of time.
Trustee Education Service
LRBA’s are not simple so being able to help your clients understand their LRBA and the annual requirements means they can more readily engage with this strategy and know what is required to keep their SMSF compliant each year. Here are some LRBA related products you may want to check out:
Investment Strategy Template – to help your client properly document their considerations regarding liquidity and lack of diversification that are inherent in an LRBA structure
LRBA Audit Documents Required Checklist – to help your client understand the documents that they need to retain for audit purposes across the life of the LRBA
Marketing your LRBA services as an SMSF Specialist
Once you’ve decided to make LRBAs part of the strategy to grow your SMSF business you will want to be in a strong position to market this. Completing specialist SMSF training and attaining specialist qualifications like becoming an SMSF Specialist Advisor with the SMSF Association can set you apart from other generalist advisers and accountants.
Keep It Simple Super provides wholesale SMSF Administration services that rely on simple workflows that remove complexity and give you back your time. For 15 years, these workflows have helped Financial Advisers and Accountants build and grow services for their clients. Get in touch now.