What happens if the SMSF or the members are unable to keep up with their respective loan repayments?
If the SMSF, or any related parties that have funded the SMSF, cannot meet repayments on a timely basis, the Financier will enforce its lending and security rights and the Trustee may be forced to sell the underlying property. In the event there is a loss (after repayment of the Financier’s loan and the Trustees selling costs); no further action can be taken by the Financier or the Trustee against the SMSF. However, the Financier will seek recovery of any shortfall from each of the members, because they would have borrowed the loan in their own names and then on-lent it to the SMSF. In these circumstances, the members may be required to liquidate or refinance other personal assets to meet any shortfall.
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