Thursday, September 15th, 2011
Today’s release of this year’s most anticipated ATO Ruling impacting self-managed superannuation funds (SMSFs), Draft SMSF Ruling, SMSFR 2011/D1 (the draft ruling), contains good news for trustees looking to invest in property, according to The SMSF Academy (

“The ATO is now crystal clear on a lot of contentious issues around limited recourse borrowing, which were frustrating both trustees and professionals,” said The SMSF Academy’s Managing Director, Aaron Dunn. “The draft ruling gives them some much-needed guidance when making decisions around borrowing to invest in property.”

The ATO has defined what constitutes an acquirable asset, a single acquirable asset and a replacement asset and has made the distinction between repairs and improvements.

“The SMSF industry has been arguing long and loud since changes were introduced from 7 July 2010, that the strict interpretive view taken by the ATO in defining the acquired asset by its legal boundaries was too narrow and that it needed to consider the economic substance of the asset,” Mr Dunn said. “The ATO has not adopted these industry views, however, the draft ruling considers both the legal form and the substance of the asset acquired. This has many positive implications, in particular it allows trustees to use cash in the fund to improve an acquired asset.”

Mr Dunn said this means that SMSFs with cash reserves are likely to find older properties in need of renovation more attractive propositions, while SMSFs that need to borrow to invest in property are likely to find newer properties, including those available off the plan, more attractive.

However, Mr Dunn said that the draft ruling represents only the Commissioner's preliminary views on limited recourse borrowing arrangements and the public can still make comments until 28 October 2011.

“While the draft ruling provides direction to the industry so that it can begin to move forward with some degree of confidence, it is important to remember that it is still only a draft ruling,” he said.

The SMSF Academy will host a webinar discussing the impact, issues and opportunities resulting from the draft ruling later this month. More discussion on the draft ruling is available now on Mr Dunn’s blog thedunnthing –

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