The ATO has updated its publication that provides general guidance on the ATO's current views regarding the application of the superannuation law (specifically the Superannuation Industry (Supervision) Act 1993 (SISA) and related super rules) to limited recourse borrowing by self-managed super funds (SMSFs).
The super laws have been amended for limited recourse borrowing arrangements by super funds entered into on or after 7 July 2010 so that:
- super fund assets are better protected in the event of a default on a borrowing
- the asset within the arrangement can only be replaced by a different asset in very limited circumstances specified in the law
- super fund trustees cannot borrow to improve an asset (for example, real property)
- the borrowing is permitted only over a single asset or a collection of identical assets that have the same market value
- the asset within the arrangement is not subjected to a charge other than to the lender in respect of the borrowing by the super fund trustee.
The new rules are in ss 67A and s 67B of the SISA.