Replacement by way of improvement

Now that the limited recourse borrowing arrangements have passed both houses, and we await Royal Assent, our minds turn to what the changes mean for superannuation funds now wanting to borrow.

The EM to the Bill suggests that "the replacement by way of improvement of real property" will give rise to a replacement asset, that will not be permitted under the new regime.  This is curious in a number or respects:

• where in the Act does it say that an improvement of real property gives rise to a replacement asset - perhaps there are regulations yet to be promulgated;
• if there is no change to the title, it is difficult to see how there has been any change to cause the acquirable asset to change to a replacement asset;
• what degree of change is necessary to cause an improvement (no doubt the issue of repair vs improvement will come to the fore).  What about watering the lawn - is that an improvement?
• and what mischief is this designed to address - presumably to prevent development occurring, but what about relatively minor improvements aimed at enhancing the value of the property?

And finally, what if the superannuation fund uses its own money rather than borrowed money to undertake the improvement.  After all, the restrictions in the new provisions are all about the way in which the money borrowed is applied, rather than other funds made available from the superannuation fund.