The Australian Taxation Office has published its final ruling SMSFR 2012/1 on Self Managed Superannuation Funds: limited recourse borrowing arrangements.

The ruling is consistent with previous draft rulings on the exceptions to subsection 67(1) of the Superannuation Industry (Supervision) Act 1993 which prohibits a trustee of an SMSF from borrowing money or maintaining an existing borrowing of money.

The ruling sets out the ATO’s interpretation of the exception to the prohibition on borrowing in sections 67A and 67B.

Section 67A permits a borrowing arrangement (an LRBA) if the money borrowed is, or has been, applied for the acquisition of a single acquirable asset and that asset is held in a holding trust.

Section 67B contains the specific circumstances where the borrowing arrangement may be maintained in relation to a replacement asset rather than the asset originally acquired.

It applies to arrangements entered into on or after 7 July 2010 (including an arrangement that is a refinancing of a borrowing of money under an arrangement entered into before, on or after 7 July 2010).

It gives the ATO’s views on 15 different scenarios.