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.
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