SUPER FUND BORROWING                                                                                    Back > News/RESOURCES

 It has until recently been a hard and fast rule that an SMSF cannot borrow money, except in very limited circumstances.

It has until recently been a hard and fast rule that an SMSF cannot borrow money, except in very limited circumstances.

However, changes to the law mean that super funds can, providing that certain requirements are strictly met, invest in some instalment warrants or enter into a similarly structured and complying arrangements involving borrowing money to acquire a permitted asset. Arrangements must meet the conditions stipulated by the law.

The main benefit of using an instalment warrant is that you can bring forward the purchase of a business property or other investment. You no longer have to wait until your super fund has enough funds to purchase the investment outright. You may also be able to make a loan to your supe

rannuation fund in addition to the concessional and non-concessional contribution caps. 
Under the new law a super fund is permitted to borrow money, or maintain a borrowing of money, providing the arrangement entered into satisfies each of the following conditions:

• The borrowed monies are used to acquire an asset which the fund is not otherwise prohibited from acquiring.;
• The asset acquired is held on trust so that the fund receives a beneficial interest in the asset;
• The super fund has the right to acquire legal ownership of the asset by making one or more payments after acquiring the beneficial interest;
• Any recourse that the lender has under the arrangement against the super fund is limited to rights relating to the asset acquired.