The Australian Taxation Office (ATO) will use its discretionary powers to provide relief for self-managed superannuation fund (SMSF) trustees who have acquired a property in their fund that has been damaged as a result of recent natural disasters.
Specifically, taxation commissioner Michael D'Ascenzo is using powers provided to him under the Superannuation Industry (Supervision) Act to allow SMSF trustees to use limited recourse borrowings to repair the fund asset damaged by the disaster in question.
In many instances the type of repairs that are needed would normally be classified as an improvement to the asset or even a replacement asset, neither of which can be funded via the use of a limited recourse borrowing.
However, the commissioner indicated he was willing to disregard breaches of the replacement asset rule due to the extraordinary circumstances faced by some individuals.
"In financing repairs or incurring other costs, trustees may need to borrow funds and if trustees contravene the limited recourse borrowing provisions due to the natural disasters experienced Australia-wide, we would be favourably inclined to exercise the commissioner's discretion under section 42A(5) of the Superannuation Industry (Supervision) Act 1993 to continue to treat the super fund as complying," D'Ascenzo said.
"We are currently reviewing this matter with APRA (Australian Prudential Regulation Authority) and Treasury to ensure no unintended consequences arise."
