SIS Act prohibits superannuation funds from borrowing money.

There are several exceptions to this:

  • The tax office can grant the trustees the right to borrow in certain circumstances.
  • When paying of a benefit, where without the borrowing, the benefit could not have been paid.
  • When paying of surcharge or advance instalment.

The borrowing must not exceed 10% of the market value of the underlying assets of the fund and for a period not exceeding 90 days.

Trustees are not allowed to put a charge on the assets of DIY Super Fund. All assets should be without a lien and should be fully owned.

However trustee may borrow money for a period not exceeding seven days to finance a transaction, however, the trustee must have entered into the transaction with the intention of not borrowing. The borrowing must not exceed 10% of the market value of the underlying assets of the fund.

Significant civil and criminal penalties may apply to trustees of DIY Super Fund who contravene the borrowing provisions. Failure to comply with the borrowing rules may also result in the fund becoming a non-complying DIY Super Fund.

 

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