Don’t get excited about borrowing in super
Peter Bobbin
The new rule now allowing superannuation funds to borrow has caused much anticipation within the industry, however, according to lawyer Peter Bobbin, it is nothing to get excited about.
Speaking at the Self-Managed Super Fund Professionals Association of Australia National Conference, Bobbin, a senior partner with The Argyle Partnership Lawyers, shed some light on the new section of the Superannuation Industry Supervision Act causing all the fuss — section 67(4A).
“[This new section] does not permit a superannuation fund to borrow, it relaxes the prohibition in section 67(1), but only if the conditions within the new expectations are met,” he explained.
“The proper starting point for analysis of this new law is not with section 67(4A) but with the prohibition in section 67(1) — a superannuation fund must not borrow or maintain an existing borrowing — this rule still applies.
“Section 67(4A) is an exclusion section that saves a superannuation fund from being in breach of the borrowing prohibition.”
Bobbin stressed to delegates that to enjoy this exclusion, the arrangement must comply precisely with the elements expressed in the new section and that there was no room for error.
Specifically, Bobbin said that based on the wording of the new law, it is not a borrowing; it is actually a debt funded asset acquisition.
“It is just ordinary gearing that just happens to be available in superannuation,” he added.
“Don’t get overly excited about it; just approach it like you would anything else.”
AUTHOR
Mike Taylor
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