| Description | Softcopy * |
|---|---|
| Currently fund has a bank lender and the refinance will not require the asset to transfer to a new security trustee | $1,450 |
| Currently fund has a related party lender and the refinance will not require the asset to transfer to a new security trustee | $1,850 |
| The refinance will require the asset to transfer to a new security trustee | POA |
| * Add $75 for hard copy per arrangement. | |
Section 67A(1)(a)(ii) of the Superannuation Industry (Supervision) Act 1993 (Cth) allows for the refinance of a limited recourse borrowing arrangement loan. The DBA loan refinance package provides the necessary documents to refinance such a loan. It includes:
- Letter
- Trustee minutes
- Loan agreement
Where an SMSF trustee has borrowed from a non-bank lender in connection with an LRBA, the ATO has confirmed its view that any income (including any net capital gains) derived in connection with the LRBA will be non-arm’s length income and accordingly, taxed at the highest marginal tax rate (plus any applicable levies), unless the loan is on arm’s length terms.
To assist SMSF trustees, the ATO has released PCG 2016/5, which sets out ‘safe harbour guidelines’ that effectively provide a standardised set of loan terms that in the ATO view equates to arm’s length terms for real property and listed shares and list units.
Those who are concerned might consider changing the terms of the related party loan to replicate the safe harbour guidelines or to ensure that the parties are in the same position they would have been in had they dealt at arm’s length.
We note that the ATO has stated that it will generally not consider the income derived from a LRBA to be non-arm’s length income where the LRBA was put on complying terms by 31 January 2017 and the requisite principal and interest repayments are made from 1 July 2015 onwards. Where this deadline has not been met, you may wish to consider approaching the ATO to discuss the SMSF’s position.
For more information, please refer to:
https://www.dbalawyers.com.au/ato/31-january-2017-ato-deadline-looms-lrbas/
Those who are concerned might consider changing the terms of the related party loan to ensure that the parties are in the same position they would have been in had they dealt at arm’s length.
*Please note that mortgage, charge or security documents are not included in the package and will need to be ordered separately through your preferred provider.
