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Superannuation Funds Can Now Borrow MoneyHome News + Events Subscription Superannuation Funds Can Now Borrow Money
Many Australians have significant money invested in a Self Managed Super Funds ("SMSF").
Until recently, it has not been possible for a SMSF to borrow money. The Superannuation Industry Supervision Act ("SIS Act") has been amended in 2007 to allow a SMSF to borrow and charge assets provided that special structures are used.
Access Law Group can now provide the following services in relation to a SMSF seeking to purchase property and borrow money:
1. Setting up the SMSF;
2. Acting for the SMSF in relation to the purchase of property; and
3. Document all special lending requirements of the SMSF.
The new legislation provides that the Trustee of an SMSF can borrow to acquire an asset provided that the asset is held on trust until such time as the borrowings are repaid and that the only asset to be provided as security for the borrowing, is the asset being purchased.
The important things to consider when looking to purchase an asset are:
1. An SMSF can only purchase an asset that it would otherwise be allowed to purchase under the existing Superannuation Rules. This means that the Trustee must still comply with the "Sole Purpose Test" and also the "In House Asset Rules".
2. The Property is to be purchased in the name of a Bare Trustee. This will ensure that upon repayment of the loan, the asset is transferred back to the SMSF Trustee to avoid incurring Stamp Duty, GST or Capital Gains Tax.
3. It is normal that the members of the SMSF guarantee the performance of the loan. The ATO have expressed concern that where guarantees are given, the Guarantor may have indirect access to the assets of the fund to seek indemnity from any liability that may arise. Consequently, we ensure that any Guarantors waive their rights against the SMSF assets.
4. It is very important to ensure that all SMSF documents are compliant before entering into any Loan Agreement or Contract to purchase property. We will audit your SMSF documents to ensure:
a. The transaction is within the SMSF Investment Strategy.
b. Your SMSF Trust Deed and other documentation are compliant.If you require further information, please contact David Swan of our office. Return to News + Events Subscription
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