Budget 2008-09: Borrowings of Money and SMSFs

21.10.08

The Tax Office has released a Draft SMSF Ruling in which it states the Commissioner’s preliminary view on the meaning of the phrases ‘borrowing money’ and ‘maintaining an existing borrowing of money’.

The Draft states that both phrases take on their ordinary contextual meaning. In determining whether an arrangement constitutes a borrowing of money, it is necessary to consider the circumstances of the arrangement.

Generally, a trustee of an SMSF is prohibited from borrowing money or maintaining an existing borrowing. However, the superannuation legislation provides exceptions such as where a trustee borrows to settle on the acquisition of certain financial instruments, or to make a payment to a beneficiary.