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ARTICLE · 07 APRIL 2012

Property development and SMSFs - Part 3: Borrowing to develop and documenting the development

Hall & Wilcox
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Part 3 of of the four part series on self managed superannuation fund trustees developing property.

AustraliaFinance and Banking
Andrew O'Bryan
Andrew O'Bryan
Natalie Bannister
Natalie Bannister
Rebecca James
Rebecca James
Bridgette Kennedy
Bridgette Kennedy
Mark Payne
Mark Payne

Superannuation and Taxation Update

In the second instalment of the four part series on self managed superannuation fund trustees developing property, we discussed fund trustees investing in related and unrelated trusts that undertake property development.

In this update, we consider the commercial and superannuation law issues associated with borrowing to develop property and the importance of properly documenting a property development arrangement.

Superannuation fund borrowing

Direct ownership

While on its face section 67A of the Superannuation Industry (Supervision) Act 1993 (SIS Act) permits the fund trustee to use its existing funds to improve an asset if the prudential and other requirements of the SIS Act are complied with, this view is contradicted by the Explanatory Memorandum to the superannuation fund borrowing provisions. The Explanatory Memorandum provides that an improvement to real property is in effect a 'replacement' asset so would breach

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