Superannuation
Funds Can Now Borrow
Complete Package Available Now
Recent
changes to superannuation law mean that self managed superannuation funds
(SMSF) are now permitted to borrow money. New section 67(4A) of the Superannuation
Industry Supervision (SIS) Act allows SMSFs to borrow to invest in limited
circumstances.
The limits
are:
-
the borrowed money must be applied to
the acquisition of an asset
-
the loan must be a limited recourse
loan, so the lender’s security is limited to the assets bought using the
loan and in particular doesn’t extend to other assets of the SMSF
-
the asset must not be an in-house
asset or other asset not permitted under the superannuation law eg a
loan to Member or property acquired from a Member
-
the asset must be held on
trust for the SMSF so that the SMSF has a beneficial interest in the
asset
-
The SMSF must have a right to
legally acquire the asset on payment of one or more instalments.
Other sections
of the SIS Act must still be complied with such as the sole-purpose test,
Investment Strategy requirements, related-party acquisition rules,
in-house asset rules, prohibition against charging and arm’s length
dealing requirements.
The changes
mean that funds now have effectively far greater ability to grow their
assets at a time when strict limits are imposed on making both deducted
and undeducted contributions.
A
superannuation fund, for example, can buy real estate. Previously a
fund may not have had sufficient funds to do this however using money the
fund has, as a deposit, the fund can then borrow the balance needed.
The fund could borrow the money from a third party. Alternatively the fund
could borrow from a related party. For example, it could borrow from
the Member (or a related party) who has funds that the Member could lend
to the superannuation fund therefore enabling the capital appreciation of
the asset to be taxed at concession rates in the fund (or not taxed at all
if the fund is in pension phase).
A Member could
use their own funds or borrow from the bank. The Member would then lend
the money to the fund at an interest rate. The growth in value of the
asset that has been purchased will be in the superannuation fund and
concessionally taxed, if taxed at all.
The asset that
is being purchased that will be beneficially owned by the superannuation
fund must stand in the name of a Trustee of a trust that holds the asset
on behalf of the superannuation fund. The asset cannot be held in the name
of the superannuation fund and must be held by separate Trustees for the
Trustees of the superannuation fund.
We have had our lawyers prepare a complete set of documents including
Trust deed/Loan Agreement and Minutes of Meeting to assist accountants who want
to take advantage of the new legislation.
The
documents are suitable only where the lender (and the other parties to the
documentation) are willing to use the loan agreement (and other documentation)
that is included. A lender who is in the business of lending money usually
requires their own documentation and is likely to have rules and requirements
as to payment of fees and interest and other requirements before lending. You
should not use this service without the lender’s agreement to accept these
documents.
-
You should consider taking independent advice from the holder of an
AFS licence before making a decision on any financial product and before making
any financial decisions including advice as to the cost of borrowing from a
third party lender compared with the costs of borrowing from a member of the
fund or other associated person or entity.
-
We are not licensed to provide financial product advice;
-
Taxation is only one of the matters that must be considered when
making a decision on a financial product.
Click HERE
to view a sample of the Deed.
Click HERE to
read ATO questions and answers - Instalment warrants and super funds
Click HERE to
read Taxpayer Alert TA 2008/5
New Superannuation Deed Update Service
To take advantage of the new Simplified
Superannuation legislation Computerised Shelf Companies now provides a comprehensive deed
update service. To place your order for a Fund update log in to Online Ordering and select Superannuation
Fund Update from
the Services
menu .
Hybrid
Trusts
Computerised Shelf Companies now offers Hybrid Trusts. Hybrid Trusts may be appropriate
in many cases for tax planning, estate planning, asset protection and
other purposes. Some of the
key features include:
·
Units may be
redeemed.
·
There is a
pre-emption provision in relation to the transfer of
units.
·
Income
streaming provisions are included.
·
Provisions
for distributions of capital and income in proportion to units held with
provisions to stream income to the wider class of discretionary
beneficiaries.
·
The wider
class of discretionary beneficiaries includes (as defined in the deed)
related persons, companies and trusts.
·
Provisions
for reserves.
·
Broad
trustee powers.
·
The
discretionary beneficiaries are not entitled to any trust assets or income
unless the trustee of the hybrid trust exercises discretion for their
benefit.
Privacy Amendment (Private Sector) Act 2000
The Privacy Amendment (Private Sector) Act 2000 establishes a national scheme
for the
handling of personal information by private sector organisations. The
legislation comes into effect on 21 December 2001. Read our
Privacy Statement.
To learn more about Computerised’s No Nonsense, Economical services and how they
can save you time and money,
telephone today on 1300 856 972.
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