Danni Kirwan, Marketing Executive
On 7 June 2010, changes were made to the law on borrowing through Self Managed Superannuation funds (SMSFs). If you are considering borrowing through your SMSF, or are already in the process of preparing to borrow, these changes may affect you.
All Cleardocs documents are up to date. As always the changes were developed and signed-off by our lawyers at Maddocks.
So what are the changes?
Most noticeably, the name for SMSF Borrowing arrangements has changed from “Instalment Warrant Borrowing arrangements” to “Limited Recourse Borrowing arrangements”. Other key changes are:
· The borrowed money can also be used by the SMSF to pay borrowing related expenses including stamp duty, conveyancing fees and loan establishment costs. Under the old arrangement, it wasn’t clear if funds could be used for these sorts of expenses.
· The SMSF can refinance its borrowing.
· The SMSF can use the borrowed money to purchase a ‘single acquirable asset’, which can include a collection of shares in a company or a collection of units in a unit trust – so long as the shares or units acquired are of the same class with the same market value.
These changes are expected to be welcomed by SMSF Trustees, as they provide greater clarity than the previous rules as well as, generally, more flexibility.
How do the changes affect the Cleardocs documents?
The Cleardocs SMSF borrowing packages and SMSF deed were updated, on the advice of Maddocks, on Friday 9 July in accordance with the law changes.
If you haven’t yet started the borrowing process, then:
· Any new SMSFs set up are capable of Limited Recourse Borrowing
· To purchase an SMSF Borrowing package from Cleardocs, the SMSF needs to have a deed that was created or updated on or after 9 July 2010.
If you’ve paid Cleardocs for your SMSF Borrowing documents but the loan has not yet started, then you need an updated version of the Cleardocs documents, please call us on 1300 307 343 and we will arrange the new documents for you for free.
If your SMSF borrowing is already in place, then you don’t need to do anything about the documents. They are fine as they are.
What do you think about the changes?
We’d love to hear your thoughts on the SMSF Borrowing changes. Do you think the new rules help to clarify the SMSF Borrowing process? You can leave your comments below.
Need more information?
For a more comprehensive review of the changes, Maddocks have prepared the following ClearLaw articles on the topic:
Related Cleardocs Documents