The word getting round was that the Federal Government was going to ban borrowing from within SMSFs due to the misuse of limited recourse borrowing arrangements. Let’s put a stop to this rumour as the government has given a clear signal that this won’t be the case but some underlying rules may be tightened up.
We have all heard the stories of people starting a SMSF to buy a modern new apartment off-the-plan and then the property price dives or the rent withers up. The SMSF may then need to liquidate all its other assets and possibly have huge issues when the fund moves into pension phase. This not a good outcome at all but these stories are the exception to the rule. Only 0.07 per cent of Australian residential property – a mere 6,500 dwellings – are held by an SMSF through a limited recourse borrowing arrangement.
Since the misuse of LBRAs in SMSFs is rare the government assures us that they are not going to ignore the risks but their response is in proportion to the problem. Please contact us If you are interested in a LBRA strategy for your SMSF.