With greater certainty around the use of limited recourse borrowing arrangements within Self Managed Super Funds, the Australian Taxation Office (“ATO”) appears to be feverishly producing information and decisions in this area for trustees and professionals.
In the past couple of weeks, the ATO has issued ATO ID 2010/162 on arm’s length dealings for related party loan arrangements (see previous blog, “what interest rates can you charge your funds for a limited recourse loan?”). We have also recently seen the release of three further interpretative decisions dealing with loan arrangements under the “old” section 67(4A) requirements and the “new” section 67A & 67B laws.
These interpretative decisions are:
- ATO ID 2010/170 – limited recourse borrowing arrangements – third-party guarantee – this ruling confirms that personal guarantees provided under the ‘old’ section 67(4A) requirements do not breach the borrowing rules (the ATO views have swung 180 degrees from their original concerns outlined in TA2008/5 in April 2008).
- ATO ID 2010/172 – limited recourse borrowing arrangements – joint investors – this ruling confirms that two SMSFs that jointly borrow to acquire an asset within a single bare trust arrangement breach the SIS Act requirements (both the old s.67(4A) and also s.67A). These arrangements can only involve one SMSF.
- ATO ID 2010/169 – limited recourse borrowing arrangements – refinancing – this ruling confirms that a SMSF that entered a limited recourse borrowing arrangement under the ‘old’ s.67(4A) requirements can refinance under the s.67A requirements and not breach superannuation law.
It is likely that we will see the ATO continue to release a range of interpretative decisions on this topic as more examples and issues of arrangements involving limited recourse borrowing comes to hand.