Categories | Limited recourse borrowing arrangements

ATO releases safe harbours for non-bank SMSF limited recourse borrowing arrangements

By Bryce Figot on 06/04/2016 in Announcements, ATO, Audit, Limited recourse borrowing arrangements, Taxation

The ATO have released important information detailing interest rates, loan-to-value ratios (‘LVRs’) and other terms that constitute safe harbours for SMSF limited recourse borrowing arrangements (‘LRBAs’) so that arrangements will be taken to be consistent with an arm’s length dealing. The ATO is officially calling their release a ‘Practical Compliance Guideline’. Broadly speaking, LRBAs consistent [read more]

ATO to act soon on related party LRBAs

By Daniel Butler on 21/12/2015 in ATO, Limited recourse borrowing arrangements

Through ATO ID 2015/27 and ATO ID 2015/28 the ATO seem to have cemented their position in relation to the application of s 295-550 of the Income Tax Assessment Act 1997 (Cth) to related party limited recourse borrowing arrangements (‘LRBAs’). Importantly, the ATO has since confirmed that their approach to this issue in future private [read more]

Recap on SMSF limited recourse borrowing arrangements

By Bryce Figot on 05/12/2015 in Limited recourse borrowing arrangements

The last 12 months have been a roller coaster ride for SMSF limited recourse borrowing arrangements. I thought I’d take the opportunity to re-cap what’s happened. FSI The biggest change — or more accurately the biggest non-change — is the government’s decision not to action the recommendation coming out of the Financial System Inquiry. The [read more]

There’s a sting in the tail of new LRBA laws

By Bryce Figot on 15/11/2015 in Limited recourse borrowing arrangements, Taxation

The Tax and Superannuation Laws Amendment (2015 Measures No. 2) Act 2015 (Cth) received Royal Assent on 16 September 2015. It was designed to provide ‘income tax look-through treatment for instalment warrants, instalment receipts, and other similar arrangements, and for certain limited recourse borrowing arrangements entered into by regulated superannuation funds’. On its face, it [read more]

SMSFs with related party LRBA borrowings

By Daniel Butler on 13/11/2015 in ATO, Investments, Limited recourse borrowing arrangements, SMSF compliance, Taxation

On Monday 10 November 2015, Daniel Butler, in his role as the chair of The Tax Institute’s National Superannuation Committee, attended a meeting of the Superannuation Industry Relationship Network (‘SIRN’) with representatives of the ATO and a range of industry stakeholders. ATO amnesty on non-commercial LRBAs At this meeting, the ATO confirmed that there is [read more]

LRBA holding trusts receive the ‘look through’ treatment

By William Fettes on 23/10/2015 in Announcements, Limited recourse borrowing arrangements, Taxation

The Federal Parliament recently passed legislation which affects the tax treatment of limited recourse borrowing arrangements. The Tax and Superannuation Laws Amendment (2015 Measures No. 2) Act 2015 (Cth) (‘Act’) received Royal Asset on 16 September 2015. We consider relevant aspects of the amendments made to the Income Tax Assessment Act 1997 (Cth) (‘ITAA 1997’) [read more]

How to benchmark related party LRBAs when a bank won’t lend … including where buying a reg 13.22C unit trust!

By Bryce Figot on 31/03/2015 in Limited recourse borrowing arrangements, Taxation

Related parties can lend to SMSFs. However, it is critical to watch out for non-arm’s length income. The solution is to benchmark. But how do you benchmark in situations where banks won’t lend? This is particularly an issue where the asset being acquired is units in a reg 13.22C unit trust. I have a solution! [read more]

Draft legislation released: limited recourse borrowing arrangements

By Bryce Figot on 19/01/2015 in Announcements, Limited recourse borrowing arrangements, Taxation

Treasury released draft legislation today that will impact limited recourse borrowing arrangements. We consider the major changes for SMSFs and limited recourse borrowing arrangements. Background Naturally, in order for a trustee of a superannuation fund to be allowed to borrow, the asset must be held on trust for the trustee of the superannuation fund. To [read more]

More ATO guidance for related party limited recourse borrowing arrangements

By Bryce Figot on 17/12/2014 in Announcements, ATO, Limited recourse borrowing arrangements

The ATO has just released more guidance for limited recourse borrowing arrangements (‘LRBAs’). This guidance is in addition to last week’s ATO ID 2014/39 and ATO ID 2014/40. Although this new guidance is ostensibly aimed at ‘non-commercial’ LRBAs, it should also be very relevant when setting the terms of any related party LRBA loan agreement. [read more]

SMSF borrowing — ATO ID 2014/39 and ATO ID 2014/40 both confirm that nil interest borrowings from related parties can cause non-arm’s length income

By Daniel Butler on 15/12/2014 in ATO, Limited recourse borrowing arrangements, SMSF strategy, Taxation

Two ATO Interpretive Decisions (ie, ATO ID 2014/39 and ATO ID 2014/40 both published on 12 December 2014) address the question: Will ordinary or statutory income derived by an SMSF under a limited recourse borrowing arrangement (‘LRBA’) be non-arm’s length income (‘NALI’) of the fund pursuant to s 295-550 of the Income Tax Act Assessment [read more]

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