The Draft Ruling

This Draft Ruling, SMSF 2011/D1, released by the ATO on 14 September 2011 deals with a number of controversial issues relating to limited recourse borrowing.

The Draft Ruling should be welcomed by SMSF investors (and their advisers).

The Draft Ruling primarily deals with two simple questions: what is a single asset?  And when is an asset transformed into another asset?  These simple questions arise because the limited recourse borrowing rules revolve around the concepts of a “single asset” and “replacement asset”.

This Special Edition is merely intended to highlight some of the more interesting aspects of the Draft Ruling.  It is not a complete and exhaustive commentary on the Draft Ruling.  While the Ruling is draft, SMSF Trustees and advisers should exercise caution in relying on the Ruling or the reasoning underlying the Ruling.