Thanks for your comment.

For the purposes of when the investment commitment time occurs, the ATO distinguish between chattel mortgages whereby the mortgagee (i.e. financier) is the legal owner and one where the mortgagor (i.e. you) is the legal owner.

In the former case the time when the chattel mortgage contract is entered into is considered to be the relevant investment commitment time whereas in the latter case the time when the order contract is entered into is considered the investment commitment time.

You will need to check with the financier which category the particular chattel mortgage falls under.

Regards

Rob Power

I have had advice from a car Finance staff that a Chattel Mortgage approved by 31Dec is my only way to be eligible for a new car ordered yesterday 28Dec. And this is the same loan that other customers have done recently given that there are only a few days left for the tax break deadline.

Above article does agree with this.

My accountant is unfortunately on holidays and wont be back until mid Jan so I can only rely on information on the net.

I have found other articles and discussion on this too.

You think I am safe to go ahead with a Chattel mortgage approval?

Thanks very much and your website is so informative indeed.

Mae Atendido

Self Managed Superannuation Funds Ruling SMSFR 2009/1, paragraphs 90 – 95 indicate that in certain circumstances, it may be possible for a superannuation fund to hold an interest in real property as a tenant in common.

Care should be taken in such a situation as the separate borrowings by the two funds links the financial fortunes of the two funds and could give rise to issues such as providing financial assistance under section 65 if the parties are related. Meeting the requirements of section 67(4A) is only one of the matters to consider when advising if such a situation complies with the SIS law.

* the borrowed monies are used to acquire an asset which the fund is not otherwise prohibited from acquiring;
* the asset acquired (or a replacement asset) is held on trust so that the fund receives a beneficial interest in the asset;
* the super fund has the right to acquire legal ownership of the asset (or, if applicable, the replacement asset) by making one or more payments after acquiring the beneficial interest; and
* any recourse that the lender has under the arrangement against the super fund is limited to rights relating to the asset acquired (or, if applicable, the replacement asset). That is, the lender is able to have the right to recover monies where there is a default on the borrowing by repossessing or disposing of the asset acquired, but cannot have the right to recover such monies through recourse to the fund’s other assets.

The second bullet point above requires that the asset is held on trust such that the fund only has a beneficial interest in the asset. This prevents the trustee of the fund owning the asset directly.

In our view, the most appropriate type of trust under which the asset must be held should be a ‘bare trust’. In other words, the bare trustee does no more than hold the legal title in the underlying asset, and has no active duties to perform with respect to the asset, and the super fund is ‘absolutely entitled’ to the asset.

Your example of a member simply lending funds to the super fund would most likely breach the prohibition against borrowing in Section 67(1) of the SIS Act, and not fall within the exception in section 67(4).

More information on the instalment warrants and super funds is available on the ATO website at http://www.ato.gov.au/superfunds/content.asp?doc=/content/00132054.htm.