Should "single acquirable asset" be "single transaction"?

One of the more contentious and troublesome provisions in the updated superannuation borrowing rules is the requirement that money borrowed by applied to acquire a "single acquirable asset". This is raising a range of issues, particularly for real property. For example:

• where a property comprises a number of lots, can there still be a single asset?


• what if a single building straddles two or more lots?


• what if a number of lots are used together - say 2 lots in a strata title plan where one lot is the residential unit, and the other is the car park associated with the unit


• what if unit block is on a single title, and the units are subsequently strata-titled?

The ATO workshop late last year was expected to address some of the concerns raised. Whilst we wait for further clarification, one question I would ask is: why is it necessary to impose the requirement of a single acquirable asset?

When the legislation was introduced, the requirement for a single acquirable asset was said to prevent lenders from cherry picking which assets were sold in the event of default.

Even assuming cherry picking occurred before 7 July 2010, why is that a problem? If the lender realises part of the assets leaving the fund with other assets, is that effectively any different to the lender realising a single asset and having to account to the fund for the balance of the proceeds after satisfying the outstanding loan?

Wouldn't a better option be to require that assets be acquired in a single transaction? It would resolve many of the problems that are currently being flagged.

Where does McMennemin leave us

The Excess Contribution Tax issue made the front page of the Financial Review earlier this week, mainly because of the increase in cases against advisers.

What surprises me a little is the lack of concern about the decision in the McMennemin case. In that case the AAT concluded that it didn't have jurisdiction to review the ATO decision not to determine that "special circumstances" existed in relation to an excess contribution assessment.

Unusually, the ATO appealed the decision (despite being successful before the AAT), and the Federal Court confirmed the AAT approach.

Whilst amendments made in November 2010 now include a specific right of objection, these amendments weren't retrospective. Consequently, there is no right to object to any ECT assessments made before the 2010 amendments where the ATO refused to determine that special circumstances existed.

For those members who, before the 2010 amendments, unsuccessfully asked the ATO to consider whether special circumstances existed, they are now left with no avenue of appeal. Given the number of assessments that have issued, the number of members adversely affected could be considerable.