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Borrowing to Invest with Self-Managed Superannuation |
Article Submitted by: Mel C
Friday, 19 March 2010
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Self-managed superannuation funds are more flexible now than they used to be. They can now be used to leverage the purchase of an asset. However, there are still some rules and restrictions that must be complied with. Once it was not possible to borrow money to invest in your self-managed superannuation but from 2007 that changed. From then on it has been legally possible for a self-managed superannuation fund to borrow money to buy an asset for the fund and pay it back in instalments. This arrangement is called an instalment warrant arrangement. The self-managed superannuation fund can now acquire an asset through repayments of a specific amount over a specified time. To do this the self managed superannuation fund must make a deposit which will be a set percentage of the total price. It will then borrow the remainder from a lending institution such as a bank or a private individual. Then of course, it will pay back the loan in instalments along with the agreed amount of interest until the loan has been fully repaid. During the period of the loan, the self managed superannuation fund has an interest in the asset and all the income from that asset must go to the fund. If the loan is in default, the lender may take security of the asset, but is not entitled to touch any other assets in the self-managed superannuation fund. This means that the money in the self-managed superannuation fund can be used to assist those who own it in the purchase of allowed assets mostly real property or shares. There are still certain legal requirements that the self-managed superannuation fund must adhere to. For instance, there is a limit to the type of asset that can be purchased. Until the loan is fully repaid the asset must be held in a trust separate from the self-managed superannuation fund. Article Source: http://www.ArticleBlast.com |
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