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SMSFs IN A "WAIT AND SEE"
Trustees of self managed superannuation funds are still waiting to take advantage of recent legislation that allows them to borrow to invest.
The ATO is yet to issue a formal view on the arrangements allowing all regulated superannuation funds to invest in instalment warrants and similar instruments.
The delay has halted the development of new loan products and prompted some trustees of self managed superannuation funds to postpone purchases.
The September 2007 changes to superannuation law went further than many expected, by theoretically allowing SMSFs and other superannuation funds to borrow to invest in limited circumstances.
The exceptions applied to instalment warrant and similar products - those that allow an investor to pay an initial sum and then borrow the rest required to purchase the asset, paying off further instalments. It is interesting that the ATO has not yet settled on a view and had refused to issue private rulings on the topic. However, the ATO has issued a draft ruling on legislation that prohibits a SMSF trustee from borrowing money or maintaining an existing borrowing of money.
The ruling does not "provide advice on the recently enacted exception for limited recourse borrowing arrangements, commonly referred to as instalment warrants".
Given the lack of clarity from the ATO and recent chaos in global financial markets, it is hardly surprising that SMSF trustees are being cautious.
Source: Tax IQ Monthly - Jan/Feb 2009, issue 69
Trustees of self managed superannuation funds are still waiting to take advantage of recent legislation that allows them to borrow to invest.
The ATO is yet to issue a formal view on the arrangements allowing all regulated superannuation funds to invest in instalment warrants and similar instruments.
The delay has halted the development of new loan products and prompted some trustees of self managed superannuation funds to postpone purchases.
The September 2007 changes to superannuation law went further than many expected, by theoretically allowing SMSFs and other superannuation funds to borrow to invest in limited circumstances.
The exceptions applied to instalment warrant and similar products - those that allow an investor to pay an initial sum and then borrow the rest required to purchase the asset, paying off further instalments. It is interesting that the ATO has not yet settled on a view and had refused to issue private rulings on the topic. However, the ATO has issued a draft ruling on legislation that prohibits a SMSF trustee from borrowing money or maintaining an existing borrowing of money.
The ruling does not "provide advice on the recently enacted exception for limited recourse borrowing arrangements, commonly referred to as instalment warrants".
Given the lack of clarity from the ATO and recent chaos in global financial markets, it is hardly surprising that SMSF trustees are being cautious.
Source: Tax IQ Monthly - Jan/Feb 2009, issue 69
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