Installment Warrant Trusts

The superannuation legislation was amended on the 7^th of July 2010 to take away some uncertainty of the Limited Recourse Borrowing’s permitted for a Superannuation Fund.  Some of the important changes are listed here.

1. Each Trust may only contain one asset, or a collection of identical assets with the same market value.  This would not allow for the purchase of a property which is on multiple titles.*UPDATE* The ATO has issued a draft ruling to relax the issue around multiple titles as of 14th September 2011.
2. Assets may only be replaced in limited circumstances.  You would not be permitted to
   1. Replace an asset as a result of an insurance claim.
   2. Replace an asset by way of improvement – repairs to an asset are allowable but only where they do not improve on the existing asset.  For example replacing an asbestos wall with gyprock.  
   3. Replace a single title over land with a series of titles as a result of a subdivision.
   4. Replace a title over the asset as a result of re-zoning.

*UPDATE* The ATO has issued a draft ruling to relax the issue around replacement assets as of 14th September 2011.

1. The ATO will allow personal guarantees over the finance and the loan may be re-financed.

Further useful information about their operation.

1. You will require a separate Trust to own the asset while it is subject to borrowing, current pricing for these Trusts to purchase are around $5,000.
2. You will be required to meet the financial obligations of the finance and any ongoing expenses of ownership through cash within the superannuation fund, not externally.
3. The State Revenue Office in QLD has not excluded the possibility that the property will incur Stamp Duty a second time on final payout of the mortgage.
4. A major review of these rules will be reviewed in December 2012 which may remove the ability overall.