Limited recourse borrowing arrangements by self-managed super funds - questions and answers

What changes to a borrowing or other attributes of a limited recourse borrowing arrangement result in a new arrangement for the purposes of the super law?

If the parties adopt a change to the terms or conditions of an arrangement (either expressly or by inference) that goes to the root of the arrangement - that is, it alters the character of the arrangement in a significant way - then there is a new arrangement from that time and the earlier arrangement has come to an end. If that change happened after 7 July 2010, the requirements of section 67A of the SISA apply to the arrangement.

Changes resulting in a new arrangement include:

• the borrowing under the original arrangement is refinanced - refer to
• Can an SMSF trustee refinance a limited recourse borrowing without contravening the super law?
• Is every variation to the terms of a limited recourse borrowing regarded as a refinancing?
• there is a borrowing (drawdown) that is inconsistent with the earlier arrangement - for example, borrowing to acquire an asset or class of asset clearly not contemplated under the original arrangement
   
• there has been a change to the ultimate beneficiaries of the arrangement resulting from selling a structure involving a pre-existing arrangement.

Example: New arrangement

There is a limited recourse borrowing arrangement that meets the requirements of former subsection 67(4A) of the SISA entered into by a corporate SMSF trustee and a private company lender before 7 July 2010. On or after 7 July 2010, new directors of the corporate SMSF trustee (and members of the SMSF) and new directors of the private company lender are appointed, replacing all of the former members. The Commissioner will treat the limited recourse borrowing arrangement now controlled by the new ultimate beneficiaries as a new arrangement. The new arrangement must meet the requirements of section 67A of the SISA.

Example: No new arrangement

There is a limited recourse borrowing arrangement that meets the requirements of former subsection 67(4A) of the SISA entered into by a corporate SMSF trustee and a private company lender before 7 July 2010. On or after 7 July 2010 two new members of the SMSF are admitted as a result of changing family circumstances. The Commissioner will not treat the limited recourse borrowing arrangement as a new arrangement on this basis alone.

Sections within The arrangement and refinancing

• Are only marketed instalment warrant products allowable for SMSFs under the limited recourse borrowing rules?
• Are only instalment warrant investments over listed securities allowable for SMSFs under the limited recourse borrowing rules?
• What changes to a borrowing or other attributes of a limited recourse borrowing arrangement result in a new arrangement for the purposes of the super law?
• Can an SMSF trustee refinance a limited recourse borrowing without contravening the super law?
• Is every variation to the terms of a limited recourse borrowing regarded as a refinancing?