CGT Relief and Borrowing in super

CGT Rollover Relief for small businesses

When selling a business, there may be some tax concessions that you can take advantage of. One concession is the ability to contribute an assessable capital gain amount from the sale of the business to your super fund which will eliminate the tax paid on this amount. There is a lifetime limit as well as other specific criteria that must be met for this concession to apply and specialist tax advice is recommended.

Borrowing in Super

Super funds are generally prohibited from borrowing money. However, borrowing may be permitted under limited circumstances and the rules must be strictly followed. The specific exemption that allowed super funds to borrow under these strict requirements was introduced in 2007.

This includes allowing a self-managed super fund to borrow to purchase investments under certain circumstances known as a “limited recourse borrowing arrangement” (LRBA). The rules are complex and professional advice is again recommended. The SMSF is able to borrow funds to purchase a single asset, or collection of identical assets, which must be held in a separate trust outside of the super fund. If the loan defaults, the lender's rights are limited to the asset held in the separate trust. This means there is no recourse to the other assets held in the SMSF.

Note that from 10 August 2026, new legislation introduced will now mean that no new LRBA’s will be permitted on property purchases, unless the property is deemed to be ‘business real property’.  That is, the property is used “wholly and exclusively” in the running of a business.  Accordingly, residential property will no longer be able to be acquired under a LRBA. However, this borrowing restriction on property purchases will not apply to any LRBA’s that existed prior to 10 August 2026.