Borrowing Through Your SMSF Could Cease

Using your SMSF to borrow money directly can be an extremely well leveraged strategy to supercharge your SMSF. But with recent recommendations to the government, will borrowing through your SMSF soon cease?


At the end of last year David Murray handed down his ‘Financial Systems Inquiry Report’, which included 44 recommendations, one of which was the prohibition on direct borrowing by superannuation funds. What’s the big deal?

Using your SMSF to borrow money directly can be an extremely well leveraged strategy to supercharge your SMSF.

Westerlo How?

Without going into specifics, borrowing through your SMSF increases the amount of money you have exposed in the market. For example, if you have $1 million and invested to get a 10% return you will get a $100,000 return. However if you borrowed another $4 million on top you would have $5 million invested for a return of $500,000 so as long as the interest repayments on the $4 million were less than the additional $400,000 return then you’re in front.

como conocer hombres arabes So why do the G-Men want it banned?

Well first of all, it’s not the government that would like to see it gone, the FSI is an independent report chaired by former CEO of the CBA, David Murray. The Treasurer Joe Hockey states that this report poses questions to the government and not the other way around. Decisions are not expected to be made until March 2015 at the earliest.

As the report tackles SMSF’s it poses a warning that high levels of borrowing through SMSF’s could be detrimental to the financial system over time. Therefore, the recommendation from the report is that all LRBAs in superannuation funds should be banned. What’s Next?

Although these recommendations are just that – recommendations do not constitute law. If all the pundits are to be believed, most of these recommendations will be accepted and implemented.

Therefore if you’re interested in this strategy or would like to know if it’s something that you could do, contact us today.

If these changes go through what will happen to my Limited Recourse Borrowing Arrangement (LRBA)?

It is understood that all LRBAs implemented before this recommendation becomes law will be ‘grandfathered’ in, meaning they will carry on as always.

There are several approaches for this strategy and they can be very powerful, that being said they may not work for others. It is critical to get quality advice before taking action. Call us today to speak to one of our SMSF experts before this opportunity goes away for good.


Husbands Share Transfer To Wife Is Taxable

Co-ownership of assets is an issue that couples need to consider as a fact of sharing their lives. However, a decision by the Administrative Appeals Tribunal (AAT) has highlighted that the romantic notion of “what’s mine is yours, and what’s yours is mine” does not apply from a tax point of view. The case highlights the importance of seeking tax advice before transferring assets between partners to formalise joint ownership.


Couples often need to deal with the issue of co-ownership of assets. This is a fact of sharing their lives together. For example, should an asset be held in the name of one of the partners or should the asset be held as tenants in common or as joint tenants? However, one case before the Administrative Appeals Tribunal (AAT) has highlighted that if an asset was held in the name of one partner, it may be wiser to leave that asset in that partner’s name, rather than take action to formally recognise joint ownership.

In Re Murphy and FCT [2014] AATA 461, the AAT confirmed that a taxpayer who was the sole owner of shares he inherited, but who transferred the registered title to the shares to joint ownership with his wife, was liable for capital gains tax (CGT) on the transaction. It did so on the basis that the taxpayer had disposed of a fractional interest in his shares (namely, 50%), and that this triggered a taxable event known under the tax law as CGT event A1. As a result, the taxpayer was assessable on a $20,000 capital gain made on the transfer.

The taxpayer argued that he and his wife regarded themselves as joint owners of all that they collectively owned, and that he believed from the outset that in equity, and morally, the shares that were transferred were owned “jointly”. He also claimed that he did not make any capital gain because he had not received anything and that if he knew he would be subject to tax on the transfer, he would not have transferred the shares.

However, the AAT found that tax law (unlike family law) did not recognise such sorts of “joint asset ownership” arrangements involving family members and that the transfer fell squarely within the terms of CGT event A1 (and that shares were clearly a CGT asset). It also noted that while CGT concessions under the tax law, such as a CGT rollover, are available on the transfer of assets between spouses on marriage breakdown, no CGT rollover was available in these circumstances.

Finally, the AAT cautioned that “unless there is reason to do otherwise, partners to a marriage or marriage-like relationship who hold the assumption that his or her assets are our assets, would be well advised to continue with that assumption, without taking the step of formalising any joint ownership arrangements, as there will be a taxing point if they do if the transferred assets have increased in value”.

Take home message

The often quoted phase “what’s mine is yours, and what’s yours is mine” may be true in a relationship. However, when it comes to transferring assets between partners, the tax law does not recognise such romantic notions. Couples should consider seeking advice on tax implications before deciding to transfer assets. Please contact our office for further information.

Joint ownership

The following are some key points from the ATO concerning joint ownership:

  • Tenants in common – individuals who own an asset as tenants in common may hold unequal interests in the asset. Each owner makes a capital gain or capital loss from a CGT event in line with their interest. For example, a couple could own a rental property as tenants in common, with one having a 20% interest and the other having an 80% interest. When they sell the rental property (or any other CGT event occurs), they split the resultant capital gain or capital loss between them according to their legal interest.
  • Joint tenants – for CGT purposes, joint tenants are treated as tenants in common having equal shares in the asset. Each party therefore has an equal share of any capital gain or capital loss from a CGT event. For example, a couple that owns a rental property as joint tenants splits the capital gain or capital loss equally when they sell the property. When one joint tenant dies, their interest in the asset is taken to have been acquired in equal shares by the surviving joint tenants on the date of death.

Partnerships – for CGT purposes, a partnership itself does not own assets. Instead, each partner owns a proportion of each CGT asset. The partners use their proportion to work out their capital gain or capital loss from a CGT event affecting any asset.


Forget New Year Resolutions – I Want a Wealth Strategy!

Resolutions inherently feel like they’re going to be broken – what we need is a plan. So don’t fret if your Jan 1 resolutions are already broken, we have some advice to get you started – and staying on the right plan.


The Plan – If you’re under 40

Time is on your side friend, but the BIGGEST problem with youth is the inability to identify with your ‘future self’. This means you spend up BIG now and leave the bare minimum for later. Do not fall into this trap.

Compound interest is a young person’s best friend. You can turn modest savings into mega wealth just by being consistent. Maybe consider salary sacrificing some extra money into your super, even $20-$50 a week can make a HUGE difference down the track, and check your investments to ensure you’re happy with the risk levels of your investments.

Make sure your insurance is all in order. Do you have the correct levels of cover? Are you insured twice for the same thing? Figuring this out can be done in conjunction with a superannuation audit. Tidy up your super – many young people have several super accounts and are paying fees and sometimes insurance out of all of them. Don’t forget that this is your hard-earned money you’re burning.

The Plan – 40-60 years

The BUILD years. Let’s start to look at your debt levels. Set yourself a goal to be out of bad debt as soon as possible to secure your future.

It is critical to have your insurance in order and your super fund building nicely. Consider additional contributions, but make sure you don’t exceed the maximum allowed annually. Consider how to maximize your earning potential inside and outside of work, this may involve doing some additional training to up-skill or looking to maximise your investments.

Keep an eye on your super. Your risk/growth profile will need to be constantly monitored – is it time to look at an SMSF? How much money will you need to retire? Are you on track? Maybe it’s time to check out your Freedom Report.

The Plan – Getting ready to retire and beyond

Let’s take a good look at your situation, how long will your money last? How is your super performing? Remember, your super keeps working long after you stop. Make sure your happy with the returns you’re getting and are likely to get in the years to come. Where is your estate planning up to? Are your assets protected?

Most importantly – make sure you have money to ENJOY your life, you’ve worked hard for it – you deserve it.

The Plan – Everybody

While everyone else is reflecting – take some time out to analyse your financial situation by following these steps:

Figure out your net worth, Include all of your assets including cash and super then subtract your liabilities. Write down your NET worth.

  1. Write down your goal net worth – how much will you be worth this time next year? What percentage growth is that?
  2. Analyse your super, do you know where all your super is? Do you need to roll them into one account? Are you happy with the risk/growth profile?
  3. Figure out how much money you want to retire with – are you on track?
  4. Make an appointment with one of our expert advisors for your own personal Freedom Plan.

You don’t have to go it alone, the difference between having all the money you need in retirement and a nervous hope that the money doesn’t run out can be a few decisions – Contact Us today so we can help.