SMSF borrowing guides unreliable

Advisers told to seek legal advice

By Darin Tyson-Chan
Tue 20 May 2008

SMSF advisers and trustees warned not to rely on ATO guides to borrowing.

Legal experts have warned self managed super fund (SMSF) advisers and trustees not to rely on Australian Tax Office (ATO) guidance on gearing.

The advice was in reference to two specific ATO issued aids; the Questions and Answers guide and Taxpayer Alert TA 2008/05.

"These documents aren't actually legally binding so you can't really rely on them in lieu of proper advice," DBA Butler representative Claire Malone said.

The material from the ATO ranges in quality and therefore usefulness, according to Malone.

"Some of the statements are very useful, others are very general and are actually quite ambiguous," she said.

"They've just put issues out and said this is a concern and this is a concern but they haven't actually given a view either way."

Some crucial elements are not even mentioned, Malone pointed out. She advised SMSF trustees and advisers to seek specific legal advice on individual cases.

"They don't even talk about the tax side of things, so you certainly need to get advice on these [borrowing within an SMSF] before you jump into it," she said.

On a positive note the recent Federal Budget did not change any of the rules to borrowing within a super fund which Malone considered a relief.

"We heard that the laws regarding borrowing were going to be repealed and you had to get something in place by Budget night to get it grandfathered," she said.

"We heard that they might introduce some very restrictive LVR (loan value ratio) in the legislation, but the good news is that there was no news ... so it's full steam ahead as far as we're concerned."

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