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SMSF borrowing rules

SMSF trustees can only borrow in their SMSFs if the following conditions can be met:

  1. to pay member benefits or outstanding tax liabilities
  • the borrowed amount can not be more than 10% of your total SMSF assets
  • the borrowing period can not be more than 90 days

     2. to settle investment transactions 

  • the borrowed amount can not be more than 10% of your total SMSF assets
  • the borrowing period can not be more than 7 days

    3. using instalment warrants

  • there is no amount limit or borrowing period restrictions
  • you will need to check the instalment warrants providers to make sure their products comply with SIS Act

    4. using limited recourse borrowing agrrangements (LRBA)

  • there is no amount limit or borrowing period restrictions
  • banks or financial institution may only lend to your SMSF up to 30 years
  • LRBA from a related party, such as SMSF members, need to be done on a arm’s length transaction basis
  • a separate trust called custodian trust (bare trust) need to be set up
  • one custodian trust can only hold a single asset, such as a property, or collection of identical assets, such as 1,000 BHP shares.

Apart from the four scenarios as above,  there are not other circumstances your SMSF can borrow money if you use iCare Super’s SMSF administration services .

We recommend talking to us first before your borrow any money in your SMSF.

We will advise you the steps to follow and what documents or structure required to make sure the borrowing in your SMSF is complying with the SIS Act.

 

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