Implement Complex Loan Structures (FNSFMB514)
Structures that solve problems
FNSFMB514 covers structures such as trusts, companies, self-managed super funds (SMSFs), partnerships and multi-security arrangements. Candidates must understand who the borrower is, who the guarantor is, and how the structure affects serviceability, tax and asset protection. Learn the difference between individual, joint, company and trust borrowers, and the documentation each requires.
Concepts to master
- Borrower entity types and their documentation (trust deeds, company constitutions, ASIC extracts).
- SMSF lending: limited recourse borrowing arrangements, bare trusts and the sole-purpose test.
- Cross-collateralisation and its risks.
- Splitting loans across fixed and variable, and across multiple securities.
- Guarantor and indemnity arrangements, and limited guarantees.
Traps in questions
A common trap is treating an SMSF loan like a personal loan; the fund is the borrower and the recourse is limited. Another is confusing a trustee with the trust, or assuming a company guarantee is unnecessary. Watch for answers that ignore the sole-purpose test or that cross-collateralise without disclosing the risk.
Rule of thumb
Identify the entity, then the evidence. The borrower entity determines the documents, the guarantors and the recourse.
Worked example
An SMSF purchases a residential property. The fund borrows under a limited recourse borrowing arrangement, with a bare trust holding the asset. The broker must confirm the sole-purpose test, obtain the trust deed and bare trust, and ensure the lender's SMSF policy is met.