Limited recourse borrowing arrangements

We have issued final SMSF ruling SMSFR 2012/1 - Self Managed Superannuation Funds: limited recourse borrowing arrangements - application of key concepts.

For self-managed super funds (SMSFs), the ruling explains the application of key concepts for the purposes of the limited recourse borrowing arrangement (LRBA) provisions. The LRBA provisions provide an exception to the prohibition on trustees of regulated super funds borrowing, or maintaining an existing borrowing of, money.

These provisions are found in sections 67A and 67B of the Superannuation Industry (Supervision) Act 1993 (SISA). The key concepts explained in the final ruling are:

• what is an 'acquirable asset' and a 'single acquirable asset'
• when is the asset maintained or repaired and when is it improved
• whether improvements or alterations result in a different (replacement) asset.

The views in the ruling apply to arrangements entered into on or after 7 July 2010 (including an arrangement that is a refinancing of a borrowing of money under an arrangement entered into before, on or after 7 July 2010).