Restrictions still apply for instalment warrants
The Australian TaxationOffice has issued a taxpayer alert warning investors to be careful when entering into certain limited recourse borrowings to acquire assets for their self managed super fund (SMSF), as they may not comply with current superannuation laws.
Despite recent changes to super laws that relaxed previous bans on SMSFs borrowing money to purchase assets, a number of restrictions still apply.
“We are concerned where borrowings feature non commercial interest rates, or where there is capitalisation of interest, or where members provide personal guarantees secured beyond charges over the asset purchased,” Tax Commissioner Michael D’Ascenzo said.
According to D’Ascenzo, the limited recourse borrowing arrangement does not apply to existing SMSF assets and instalment warrant investments by way of ‘shareholder application’ or ‘cash extraction’ arrangements are still not allowed.
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