The National Tax Liaison Group (NTLG) Super Sub-group has pinpointed the definition of a "single acquirable asset" in the new self-managed superannuation fund (SMSF) borrowing rules as an item needing enhanced clarification before trustees and advisers can accurately abide by the revised regulations.
The call for clarification has come about due to the recognition of particular situations where the current definition leaves too much doubt as to the proper treatment of certain assets if a limited recourse loan is used as part of the purchasing arrangement, that is, if more than one holding trust would need to be established.
According to Harwood Andrews Lawyers principal and NTLG member, Rob Jeremiah, acquiring a building erected on land with multiple titles using borrowings is a situation where the asset may or may not be deemed as a "single acquirable asset".
"One answer would be quite simply if a building is erected over two titles it can't be sold separately, so it must be a single acquirable asset," he said.
"What happens, though, if the building is demolished? Can't the asset be sold separately as there are two titles, so therefore is it a single acquirable asset?" Jeremiah said.
A similar situation is where there is a strata title unit and an accessory unit being purchased.
"This is a very common transaction and we know with an accessory car park unit it can't be sold separately," Jeremiah said.
"But are they two separate assets because they are described in two separate titles or is it that they can only be sold together as one asset? So what constitutes a single acquirable asset?" he said.
Jeremiah said further discussion will be taking place between the Australian Taxation Office and industry, so everyone in the SMSF space can get a better understanding of the rules.
"Maybe it requires for the act to be amended again. In industry today it is a real problem," Jeremiah said.
