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 all SuperGuide articles explaining SMSF borrowing.

FSI recommends ban on SMSF borrowing


In its final report publicly released on 7 December 2014, the Financial System Inquiry (FSI) recommends the removal the borrowing exception that permits ‘direct borrowing’ using limited recourse borrowing arrangements, but only for any future transactions. The FSI uses the term ‘direct borrowing’ … [Read more...]

Financial System Inquiry: Super and retirement summary


On 7 December 2014, the federal government released the Financial System Inquiry (FSI) Final Report, a 320-page document providing recommendations on five main themes. The FSI committee and secretariat received 6,800 submissions and held hundreds of stakeholder meetings. The FSI crew also met with … [Read more...]

Oops! Top 10 SMSF boo-boos


Note: Every year, the ATO publishes the top compliance mistakes made by SMSF trustees. This article contains data up to 30 June 2013. The next update, for compliance data up to 30 June 2014, will be available in early 2015. The ATO has published the top 10 compliance mistakes that SMSF trustees … [Read more...]

Is property a good investment for your SMSF?


Over recent years, I have lost count of the number of times I have been asked whether I think property is a good investment for an SMSF. The question (is property a suitable investment for an SMSF?) is an important one, and the need to ask such a question by readers, associates and even friends … [Read more...]

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


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 investment: Buying commercial property, and borrowing options


Q: My wife and I purchased a licensed post office and freehold from Australia Post nearly 20 years ago. In addition to the licence, we acquired one title with one building (part of the building is leased to a commercial tenant and part we use to run the post office). A freestanding shop was added in … [Read more...]

SMSF property: ATO issues warning over borrowing arrangements

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 may … [Read more...]

SMSF investment: Where can I find information about SMSF borrowing?


Q: I’ve just finished reading DIY Super for Dummies and found it really helpful. What interested me was the borrowing options for SMSFs. We already own a property in our fund and are looking at an instalment arrangement for financing our next purchase. In the first edition of your book you mention a … [Read more...]

What is the difference between a limited recourse borrowing arrangement and a non-recourse loan?

Q: Can you differentiate between a limited recourse borrowing arrangement (SMSF Instalment Warrant) and a non-recourse loan. Are they the same thing? The precise meaning of different terms will depend on the definitions contained in the contract that the loan provider requires a borrower to … [Read more...]

Cooper Review: Our Government’s four-pronged response


‘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 via a … [Read more...]