Recycling of Custodian Trust originally used to purchase IP in super now for shares?

[Roomer]

So in a previous post about a company being used as a custodian trust for the purpose of limited recourse borrowing, it was ascertained that upon the loan being paid the cert of title needs to be transferred from the company to the super fund. The logic would be then to deregister the company as it no longer served the function for which it was originally created.

But what about if the company is not deregistered but kept going? By this I mean continuing in utilizing the company in the same way the bank had, but instead of the bank being the lender it is you.

In other words what would be wrong in you lending some money to your superfund at exactly the same rate you would source the funds (say your own LOC). The super fund could use these funds to purchase shares, thereby allowing you to achieve a way to build up your super without breaking any caps. The logic behind ATO ID 2010/162 would seem to support this. (You of course would have to pax tax on the interest earned and I guess you would have to have open a share account in the name of the company but that's not a big ask)

Any flaws to this logic? Or is it only for the purchase of real property, not shares ? If you couldn't do this for shares are there any other assets the super fund would be permitted to borrow ?

 

[Terry_w]

The custodian trustee is just a company, i.e. a separate legal person to the fund. It can continue to exist after it has ceased acting as trustee.

I think you are confusing things with the bank. The bank has nothing to do with the custodian arrangement, it is just that the law stipulates that superfunds can only borrow to acquire an asset if is held on trust.

 

[Roomer]

Yes understood, but the point of my question is in the 3rd paragraph below ie whether you could lend funds to purchase shares via LRCB (ie In a similar manner as had the bank when the super fund wished to for purchase property)? If you could, it would appear to be a great way to build up your super without being limited by the caps currently being imposed .

 

[Terry_w]

Yes could be possible as long as all the SIS act and regs are complied with. Single acquireable asset etc.

 

[Qlds007]

Very doable and something we do with clients on a regular basis.

Just be careful however if you intend to buy and sell the shares whilst under a LRBA. A separate Bare Trust would be needed for each holding.

Cheers


Richard