ATO Clarification Of Borrowing Issues For SMSF’s

The ATO has clarified what is meant by a ‘single acquirable asset’ and what constitutes repair or maintenance of an asset.

The release of the Self Managed Superannuation Funds Ruling SMSFR 2012/1 by the Tax Commissioner has brought some clarity to issues surrounding borrowing and single assets by self managed super funds.

The ruling has clarified situations where there may be two separate assets at law but because they are inseparable then they will be treated as a single asset for limited recourse borrowing purposes. In particular the ruling clarifies circumstances where the purchase of a unit and car park can be treated a single asset allowing the using of one limited recourse borrowing arrangement LRBA, (one bare trust).

In addition the ruling provides many examples including some that we have highlighted below.

  • A completed ‘off-the-plan’ apartment
  • An acquisition of a yet to be constructed house on land using borrowings
  • A factory complex on more than one title
  • Distinguishing between maintaining, repairing and improving an acquirable asset
  • Money other than borrowings used to improve an asset
  • The purchase of cattle property and construction of a shed using SMSF funds
  • The purchase of a small farm and construction of a residence using SMSF funds

law.ato.gov.au/pdf/pbr/smsfr2012-001.pdf