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09 Apr 09 SMSFs: meaning of "borrow money" etc in s 67 SIS Act - SMSFR 2009/2

This final Self Managed Superannuation Funds Ruling was issued on 8 April 2009. It was previously released in draft form as SMSFR 2008/D4. Its full title is "Self Managed Superannuation Funds: the meaning of 'borrow money' or 'maintain an existing borrowing of money' for the purposes of section 67 of the Superannuation Industry (Supervision) Act 1993".

The Ruling states that the prohibition and exceptions in s 67 only apply to borrowings of money. Therefore, for the purposes of section 67, a borrowing is an arrangement that exhibits two necessary characteristics (see para 10):

  • a temporary transfer of an amount of money from one entity (the lender) to another (the borrower); and
  • an obligation or an intention on the part of the borrower to repay that amount to the lender (which may be satisfied by the provision of an asset).
Examples of transactions or circumstances that are not a 'borrowing' based on common terms and conditions include, but are not limited to (see para 16):

  • bona fide contributions to SMSFs that are accepted and dealt with in accordance with the Superannuation Industry (Supervision) Regulations 1994 (SISR);
  • the liability of an SMSF to pay benefits to members as they fall due;
  • arrangements under which expenses are paid on behalf of the SMSF trustee by an agent or any other person where reimbursement is immediately sought from and made by the SMSF; and
  • normal commercial delays in the payment of expenses incurred by an SMSF trustee.
For a copy of SMSFR 2009/2, go here.

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