SMSFs – Can you still borrow in Super? New rules passed

The Government recently introduced a Bill to amend the super fund borrowing rules by replacing the existing exception in section 67(4A) of the Superannuation Industry (Supervision) Act 1993 with sections 67A and 67B.

These new rules came into effect on 6 July 2010 and all new borrowings must comply with these new rules.

The new provisions are substantially the same as section 67(4A) but they clarify some aspects of the original provisions.

In our previous alert, “SMSFs – Borrowing – What have they changed?” on 1 June 2010 we outlined the major changes to the use of instalment warrant trusts.

In particular, the following issues have been clarified:

• Only one asset can be acquired in an ‘instalment warrant trust’ unless the assets are identical.
• The borrowed funds can be used to pay expenses in some cases.
• You still cannot borrow to fund construction costs.
• An existing loan can be refinanced.
• Guarantees from third parties are allowed provided they limit the guarantors’ right of recourse to the asset.