ATO clarifies SMSF borrowing issues
The Self-Managed Super Fund Professionals' Association (SPAA) has welcomed an Australian Taxation Office (ATO) ruling clarifying the status of borrowing arrangements around single assets.
The ATO ruling, handed down yesterday, has effectively ended some of the confusion associated with amendments to the borrowing rules with respect to self-managed superannuation funds (SMSFs) introduced in July, 2010.
Welcoming the ATO's clarification, SPAA chief executive Andrea Slattery said the ruling had clarified what was meant by a 'single acquirable asset' and what constitutes repair or maintenance of an asset.
"The Tax Commissioner's interpretation of these terms has provided a common sense and practical solution to legislation that could be read far more strictly," she said.
Slattery said the ruling would make life easier for both SMSF trustees and their advisers.
She noted that the ruling had also severed the link between the Superannuation Industry (Supervision) Act (SIS Act) and an earlier tax ruling on whether particular costs for repairs could be treated as capital and income.
"The purpose of the limited recourse borrowing arrangements is different to the income tax law, which is to restrict the use of the amount borrowed," Slattery said.
She said the examples provided by the ATO made it clear that the amount borrowed could be used to repair an asset, but where there was an improvement the cost had to be obtained from other sources such as the superannuation fund.
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