Self-Managed Super Funds

Investment decisions and rules

Limited recourse borrowing

The limited recourse borrowing arrangement as it relates to the acquisition of a single asset can be illustrated as follows:


Grime Superannuation Fund (an SMSF) establishes a limited recourse borrowing arrangement. The trustees are considering: 

(a) buying 1,000 ordinary shares in Company X – this is a single asset if purchased in one parcel and is permitted under the rules.

(b) buying 500 ordinary shares in Company X and 500 preference shares in the same company – this does not represent a collection of identical assets with the same market value and cannot be purchased under a single borrowing arrangement. Separate borrowing arrangements would need to be established for each parcel – one for ordinary shares and another for the preference shares.

Note: This is an area that the government is continually reviewing and is subject to change.