Many self-managed superannuation fund (“SMSF”) investors who borrow through their SMSF (SMSF loan) ask the question of what constitutes a “single acquirable asset”.
SMSFR 2012/1 released by the ATO provides 15 examples of what constitutes a single acquirable asset.
Under limited recourse borrowing (“LRBA”) rules, SMSFs are required to enter a separate lending arrangement for each “single asset” they acquire. There has been confusion in the industry particularly when purchases are made for an apartment on one title and a car park on another.
SMSFR 2012/1 clarified situations where there may be two separate assets at law but because they are inseparable then they will be treated as a single asset for LRBA purposes. It says that in the above example of an apartment and car park on separate titles, these will be treated as a single acquirable asset and hence will only require one limited recourse borrowing arrangement. This was great news for the SMSF industry as we know many SMSF purchases are made for apartments with an accompanying car park on separate titles.
“The commissioner’s interpretation of these terms has provided clarity for a growing sector of our industry, and the release will make provide certainty for SMSF members and their advisors entering into LRBA’s” says Redwood Advisory’s director Ivan Filipovic.
Refer to SMSFR2012/1 for detailed examples and be sure to seek advice prior to entering into an LRBA.
The content has been prepared without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice. Individuals should seek professional advice prior to investing in commercial property.