Lenders should be acutely aware of the severe implications associated with breaches of the Superannuation Industry (Supervision) Act 1993 (SIS Act) and its regulations by Self-Managed Superannuation Funds (SMSFs). Such breaches can result in substantial civil and criminal penalties, including hefty fines for serious violations, as specified in sections 193 and 196 of the SIS Act. These contraventions not only threaten the SMSF’s status as a complying superannuation fund but also may lead to severe tax repercussions.
An SMSF is permitted to borrow funds to acquire an asset provided that the borrowing is structured as a limited recourse borrowing arrangement. This article explains the superannuation and taxation laws applicable to limited recourse borrowing arrangements entered into on or after 7 July 2010. Different rules may apply to arrangements entered into prior to that date.
