Having the correct documentation in place is essential for running an SMSF efficiently.

For SMSF’s with a loan in place it is therefore important that the Trustees have a proper loan agreement and loan schedule in place. The loan agreement (which needs to be signed) needs to include loan amount, the interest rate (fixed or variable), repayment terms (i.e., monthly, quarterly) and the loan term.

Attached to the loan agreement, there should be a loan schedule which details the loan repayments, the interest and calculates the outstanding loan amounts at period end.

Without a proper loan schedule in place, it is impossible for the loan agreement to be effective.

With an increasing number of Trustees refinancing existing loans and establishing related party loans it is very important that all the proper steps are followed. Particularly at year end when the ATO updates the related party borrowing rate on the 1st July each year, which means the loan reschedule and loan repayment amounts need to be updated.

If necessary AAS can help draft the loan schedule (based on the loan agreement) for Trustees and advisers.

To view an example of a loan schedule click on the link below.

Loan Schedule Example