SMSF Borrowing Rules

SMSF trustees can only borrow in their SMSFs if the following conditions can be met:

1. To pay member benefits or outstanding tax liabilities:

• The borrowed amount cannot be more than 10% of your total SMSF assets.
• The borrowing period cannot be more than 90 days.

2. To settle investment transactions:

• The borrowed amount cannot be more than 10% of your total SMSF assets.
• The borrowing period cannot be more than 7 days.

3. Using instalment warrants:

• There is no amount limit or borrowing period restrictions.
• You will need to check the instalment warrants providers to make sure their products comply with SIS Act.

4. Using limited recourse borrowing arrangements (LRBA):

• There is no amount limit or borrowing period restrictions.
• Banks or financial institutions may only lend to your SMSF up to 30 years.
• LRBA from a related party, such as SMSF members, needs to be done on an arm’s length transaction basis.
• A separate trust called custodian trust (bare trust) needs to be set up.
• One custodian trust can only hold a single asset, such as a property, or a collection of identical assets, such as 1,000 BHP shares.

Apart from the four scenarios above, there are no other circumstances in which your SMSF can borrow money if you use iCare Super’s SMSF administration services. We recommend talking to us first before you borrow any money in your SMSF. We will advise you on the steps to follow and what documents or structures are required to ensure that the borrowing in your SMSF is compliant with the SIS Act.