Borrowing and lending with your SMSF

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Your SMSF can borrow money to buy assets like shares and property, providing you access to investments you may not otherwise have been able to purchase. It can also borrow money to fund payments. There are, of course, strict rules governing what and how an SMSF can borrow.

The super laws prohibits an SMSF from borrowing money, except in these specific circumstances:

  • to fund a payment to a beneficiary – in which case, the borrowing can’t exceed 90 days;
  • to cover the settlement of securities transactions – and then only up to seven days;
  • to pay a superannuation surcharge liability – the borrowing can’t exceed 90 days; and
  • to acquire an asset under a ‘limited recourse borrowing arrangement’.

From September 24, 2007, the super laws were amended to allow super funds to enter into limited recourse borrowing arrangements to acquire permitted assets. This change in the law effectively provided certainty in relation to the use of instalment warrants. However, the law now also permits the application of these arrangements to a broader set of assets. The law was further amended in July 7, 2010.

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