HQB’s Weekly SMSF News – Week 8
Borrowing in a SMSF – when can I borrow?
- Generally, SMSF’s are not permitted to borrow, either from banks or related persons;
- The main departure from this general rule is to allow for ‘limited recourse borrowing arrangements’ (LRBA’s);
- LRBA’s require specialist legal assistance to set up and involve a complex structure;
- The number of banks in the market for providing LRBA’s has decreased over recent years, but some still exist;
- It is possible for SMSF’s to borrow money from members of the SMSF as long as it is under a LRBA and complies with a series of guidelines;
- Due to the general prohibition on borrowing in a SMSF, it is a good idea to ensure that your bank is under direction to prevent the SMSF’s bank account from going into overdraft.
If you have any questions regarding the rules and opportunities involved with borrowing in your SMSF, please don’t hesitate to get in touch.
– James Davis
This article is compiled as a helpful guide for your private information and is subject to copyright. We suggest that you do not act solely on the basis of material contained in this article because items are of general nature only and may be liable to misinterpretation in particular circumstances. We recommend that our advice be sought before acting on any of these crucial areas.