Self-managed superannuation fund (SMSF) trustees can use borrowing arrangements to fund asset improvements through the use of a specific strategy, according to SMSF Strategies principal Grant Abbott.
SMSF members looking to improve assets like property and pay for the improvement by way of borrowed monies can do so using a unit trust that complies with section 13.22C of the Superannuation Industry Supervision Regulations.
“If the asset is sitting inside a trust there is nothing that says you can’t improve those assets,” Abbott told advisers at the SMSF Strategy Day in Perth yesterday.
“So the assets that the super fund is acquiring through the borrowing via this structure are going to be units in the 13.22C complying trust,” he explained.
However, trustees looking to implement a structure like this are not likely to be able to secure funding from any of the standard lending institutions.
“Generally, what SMSF members will have to do is use a related party loan to acquire the units in the trust,” Abbott said.
The use of a strategy like this will also allow SMSF members to extend the line of borrowing.
“If you wanted to give yourself a bit of an open ended funding arrangement you could partly pay for the trust units,” Abbot explained.
“By partly paying the units at any point in time you can call through the payments and this will actually allow you to have a credit line to call upon further down the line,” he said.
