NEWS – Recent ATO tax determination on LRBAs clarified related party loans but not more unusual assets

NEWS – Recent ATO tax determination on LRBAs clarified related party loans but not more unusual assets

Recent ATO tax determination on LRBAs clarified related party loans but not more unusual assets

While the ATO has further clarified their position on LRBAs and related party loans through TD 2016/16, LRBAs with more unusual assets continue to face obstacles with adjusting their LRBAs to arm’s length terms, according to the SMSF Association.

The ATO last month released a tax determination dealing with LRBAs and non-arm’s length income, further outlining its position.

Despite this guidance, SMSF Association head of technical Peter Hogan said the criteria for determining whether a borrowing arrangement is on arm’s length terms for assets such as units in a unit trusts and private company shares remains unclear.

There are currently no safe harbour guidance for these specific types of assets and third-party lenders are unlikely to ever offer loans for them, Mr Hogan said.

“Third-party lenders would be reluctant to use them as security for a borrowing so the members are forced to borrow externally using other assets and then enter into a related party loan with their super fund,” he said.

“So what sort of criteria would apply to those loan arrangements? Clearly they’re going to be struggling to find arm’s length third-party providers, as they would be reluctant to lend in those circumstances.”

For More GO HERE from SMSF Advisor

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Self-Managed Superannuation Service Providers in Australia. SuperBenefit provides a wholistic SMSF assistance, education and administration service continuum - 1. “assistance” is help of whatsoever nature where our overall SMSF experience and knowledge enables us to provide assistance/help without any legal (or “license”) limitations. 2. “education” involves providing knowledge through teaching, coaching and mentoring about all matters SMSF, including (but not limited to) investment issues such as equities and property, 3. “administration” encompasses all admin aspects of legally required SMSF trustee and member record keeping including (but not limited to) audit and ATO matters. In keeping with our key point that SuperBenefit does not provide Financial Advice, where issues arise from 1, 2, and/or 3 above Indicate a need for a legally authorized provider (such as a Financial Adviser) and the client does not have their own service provider, the client can utilize SuperBenefit’s ‘Connect Assist’ … SuperBenefit, in itself, does not provide Financial Advice, but it does provide the wherewithal for great SMSF service. WE do not provide Financial Advice or any other service that requires a legally authorized provider. However, where such advice or service is required we have our ‘Connect Assist’, a SuperBenefit resource we use to connect clients to a Licensed Advisor or other legally authorised service provider. Call us 0407 361 596, no obligation FREE Connection call to see how we can help you!
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