SMSF borrowing

The general rule is that your self-managed super fund can’t borrow money, although like all rules the ‘no borrowing’ rule has some exceptions.

SMSF trustees need to understand the difference between direct borrowing and indirect borrowing and the special rules that apply to each exception. Your fund can’t directly borrow money, except in two instances: if you need cash to pay a member’s benefit, or if you need cash urgently to settle a share transaction.

Your super fund can also indirectly borrow money. A SMSF can invest in managed funds that borrow money (geared managed funds), or even invest in instalment warrants, warrants, options or contracts for differences (CFDs).

The latest ‘hot’ trend in the SMSF world is the opportunity for a SMSF to indirectly borrow to purchase fund assets using a limited recourse borrowing arrangement.

Set out below are SuperGuide articles explaining SMSF borrowing.

SMSF borrowing: Investing in property (what’s OK and NOT OK)

November 26, 2012
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If you run a self-managed superannuation fund, you can invest in all types of real property including residential property, commercial property, industrial property and even a farm (under certain circumstances). Before September 2007, the capacity to use borrowed money to purchase an SMSF asset, … [Read more...]

SMSF property: ATO issues warning over borrowing arrangements

November 26, 2012
House blueprints

The Australian Tax Office is worried about SMSF trustees and property investing. Although the ATO doesn’t express it in this way, the SMSF regulator is particularly worried about the sheer weight of money controlled by SMSF trustees, and a bit edgy that this financially powerful group of people … [Read more...]

Oops! Top 10 SMSF boo-boos

May 19, 2012
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Note: Every year, the ATO publishes the top compliance mistakes made by SMSF trustees. This article contains data up to 30 June 2011 (latest available as at May 2012). The next update, for compliance data up to 30 June 2012, will be available in April 2013. The ATO has published the top 10 … [Read more...]

Cooper Review: Our Government’s four-pronged response

December 16, 2010
strongersuper

‘Stronger Super’ is the catch-cry heralding in the Federal Government’s response to the Cooper Review report on the superannuation system. On 16 December 2010, the Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, released the Government’s response … [Read more...]

SMSF borrowing: What’s the difference between a non-recourse and limited recourse loan?

December 16, 2010
loantypes

Q: Can you differentiate between a limited recourse borrowing arrangement (SMSF instalment warrant) and a non-recourse loan? Are they the same thing? Generally speaking, the terms 'limited recourse' and 'non-recourse' are used interchangeably because in both instances a borrower who defaults will … [Read more...]

Cooper Review: Government flags ‘bye bye’ to SMSF borrowing

December 16, 2010
goodbye

The Federal Government released its response to the Cooper Report on 16 December 2010, and among the 139 recommendations it took on board from the Cooper Report, one of those recommendations could potentially be explosive for those SMSF trustees who have used the new borrowing rules, or plan to use … [Read more...]

SMSF supervisory levy to increase from 2010/2011 year

December 16, 2010
cooperreviewing

Hidden in the Federal Government’s response to the Cooper Review is a real doozey. The Government recommends that self-managed super funds be hit with a higher supervisory levy, effective from the 2010/2011 year. It appears that the primary reason for this levy hike is: Larger super funds have … [Read more...]