The SMSF Professionals’ Association of Australia (SPAA) has commended the Australian Taxation Office (ATO) on its draft legislative instrument governing the amended treatment of the use of borrowing within superannuation funds.
The draft instrument addresses some of the technical and administrative areas of concern regarding limited recourse borrowing arrangements (LRBA) as they currently stand.
Items the ATO has focused on include the payment of double stamp duty in some states, eliminating paperwork requirements once the loan has been extinguished, and allowing properties purchased under an LRBA to be sold to the market from the holding trust when the trustees decide, without any additional transactions.
In addition, the new rules will eliminate the need for trustees to take out a small second mortgage to satisfy the technical requirements of an LRBA.
“It’s encouraging for the industry when the ATO as regulator of SMSFs adopts such a practical approach,” SPAA head of technical and professional standards Graeme Colley said.
“This legislative instrument will go a long way to resolving some of the technical issues that were impeding the practical implementation of the law around LRBAs. This is consistent with the government’s policy of reducing red tape to achieve the intended outcome of legislation.”
The ATO is currently inviting submissions from the industry about the draft instrument, with the cut-off for this input being 31 January 2014.
SPAA will be forwarding a submission and expects the new rules that do not require parliamentary approval to be implemented shortly after January.
Along with the new rules covering borrowing, SPAA also welcomed the amendments to the penalty regime for SMSF compliance breaches announced on the weekend.
“Under the current law, the system is far too inflexible – the ATO only has draconian penalties to apply to SMSFs, even for minor contraventions, and these penalties simply don’t fit the crime,” SPAA chief executive Andrea Slattery said.
“SPAA believes most trustees only breach the law inadvertently and that this new penalty regime reflects this to a far greater degree.
“However, trustees should recognise that there are still penalties in place for breaching the law and, as such, the importance of getting professional advice has never been more important.”
