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.
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