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.

Oops! Top 10 SMSF boo boos   Super Guide

The ATO has published the top 10 compliance mistakes that SMSF trustees make when running their self-managed super funds.

Is property a good investment for your SMSF?    Super Guide

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.

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

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).

SMSF property: ATO issues warning over borrowing arrangements   Super Guide

The ATO 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.

‘Stronger Super’ is the catch-cry heralding in the Federal Government’s response to the Cooper Review report on the superannuation system.

Q: Can you differentiate between a limited recourse borrowing arrangement (SMSF instalment warrant) and a non-recourse loan. Are they the same thing?

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 some SMSF trustees.

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.