When a LRBA is not at arm’s length
ATO / Limited Recourse Borrowing Arrangements / Professionals / SMSF / SMSF Compliance

When a LRBA is not at arm’s length

Non-commercial terms of a limited recourse borrowing arrangement for some time now have been acknowledged by the Australian Taxation Office (ATO) as schemes that will be subject to the non-arm’s length income (NALI) provisions in section 295-550(1) of the ITAA 1997.  This followed with practical compliance guidelines (PCG 2016/5) that set out ‘safe harbour’ terms for these … Continue reading »

SMSF Q&A: LRBAs & ATO Safe Harbour
Facebook SMSF Q&A / Limited Recourse Borrowing Arrangements / Professionals / SMSF / SMSF Compliance

SMSF Q&A: LRBAs & ATO Safe Harbour

  Last week saw the ATO provide an extension of time through to 31 January 2017 for SMSF trustees to have their existing related-party LRBA loans comply with terms that would demonstrate an arm’s length dealing for income tax purposes.  This may be demonstrated by falling into line with the safe harbour guidance provided within Practical … Continue reading »

Extension of time for arm’s length borrowings to comply
Limited Recourse Borrowing Arrangements

Extension of time for arm’s length borrowings to comply

The ATO has announced that it is allowing SMSF trustees additional time until 31 January 2017 to ensure that any limited recourse borrowing arrangements currently in existence are operating on terms consistent with an arm’s length dealing, or alternatively are brought to an end.  The Regulator had previously indicated that these non-commercial arrangements needed to demonstrate arm’s … Continue reading »

Time for LRBA’s to swim between the flags
ATO / Limited Recourse Borrowing Arrangements / Professionals / SMSF / SMSF Compliance

Time for LRBA’s to swim between the flags

With the ATO having previously issued guidance on the application of section 295-550 of the ITAA 1997 – the non-arm’s length income (NALI) provisions applying to non-commercial limited recourse loan arrangements, we have now seen long-awaited guidance through Practical Compliance Guidance, PCG 2016/5 – Income tax – arm’s length terms for Limited Recourse Borrowing Arrangements established … Continue reading »

Clock is ticking on zero interest SMSF loans
Limited Recourse Borrowing Arrangements / SMSF

Clock is ticking on zero interest SMSF loans

New measures that took effect from September 2015 for instalment warrants and limited recourse borrowing arrangements (LRBA) confirmed what had been a long-standing practice in industry – where an SMSF enters into a LRBA, for income tax purposes, the consequences of ownership of the instalment trust asset (ITA) flow to the SMSF (as the beneficial holder of the … Continue reading »

LRBAs are here to stay… for now
Government / Limited Recourse Borrowing Arrangements / SMSF

LRBAs are here to stay… for now

As we close on nearly 12 months since David Murray presented the Financial System Inquiry (FSI) final report, we have today seen the Government response overwhelming accept the majority of the inquiry’s recommendations.  Importantly, one key recommendation from the FSI panel was to impose a ban on the use of limited recourse borrowing arrangements (LRBAs) with self-managed … Continue reading »

Will it be the banks (not Government) that put LRBAs to the sword?
Limited Recourse Borrowing Arrangements / SMSF

Will it be the banks (not Government) that put LRBAs to the sword?

As uncertainty remains with the direction of leverage inside superannuation, I was interested to read a recent decision by the National Australia Bank to ‘quietly’ exit the SMSF property loan space.  In recent times the Assistant Treasurer, Josh Frydenberg has indicated that limited recourse borrowing arrangements may survive, but in a revised form, with a … Continue reading »

Government’s open mind could see LRBAs survive?
Limited Recourse Borrowing Arrangements / Professionals / SMSF

Government’s open mind could see LRBAs survive?

At last week’s SMSF Association (formerly SPAA) national conference, we saw the Government respond for the first time on the Financial System’s Inquiry recommendation to ban limited recourse borrowing arrangements (LRBAs).  The Assistant Treasurer, Josh Frydenberg indicated that the Government will consult with an ‘open mind’ on what is a highly sensitive issue with the SMSF … Continue reading »

ATO takes aim at non-commercial LRBAs
Limited Recourse Borrowing Arrangements / Professionals / SMSF

ATO takes aim at non-commercial LRBAs

The release of the much awaited interpretative decisions, ATOID 2014/39 and ATOID 2014/40 regarding non-commercial limited recourse borrowing arrangements, has provided important insights into the key elements of what the Commissioner views as non-arm’s length income (NALI) for the purposes of section 295-550 of the Income Tax Assessment Act 1997 (ITAA 1997).  Following the release of … Continue reading »

The final nail in the coffin for LRBAs?
Government / Limited Recourse Borrowing Arrangements / SMSF

The final nail in the coffin for LRBAs?

The recommendation by the FSI panel to remove direct leverage from superannuation may have delivered the final blow to limited recourse borrowing arrangements.  Concerns about the growing use of leverage inside superannuation raised the attention of the Financial Systems Inquiry (FSI) Panel, in particular focusing on the increase in risk on Australia’s financial system that … Continue reading »