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

What is the purpose of the special in-house asset rule for limited recourse borrowing arrangements?

The holding trust in a limited recourse borrowing arrangement will generally be a related trust of the SMSF. An investment by an SMSF in a related trust is an in-house asset of the SMSF unless an exemption applies.

The special rule ensures that a limited recourse borrowing arrangement entered into by an SMSF which meets the other requirements of the super law will not automatically result in an in-house asset arising from the investment made in the holding trust. Such an investment will only be an in-house asset where the underlying asset would itself be an in-house asset of the SMSF if held directly.

For more information, refer to Special in-house asset rule.

Sections within The in-house asset rules

• What is the purpose of the special in-house asset rule for limited recourse borrowing arrangements?
• Can the holding trust trustee continue to hold the property for the investor after the borrowing has ended?
• If the property owned by the holding trustee is leased to a related party of the SMSF investor, is the SMSF's interest in the holding trust an in-house asset?