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Keep LRBA legislation top of mind

SMSF practitioners must be wary of the proposed legislation for limited recourse borrowing arrangements (LRBA) this year, following the recent change to the treatment of the investor as the owner of the assets held by the holding trust.

“From a technical point of view, 2014 covered a lot more than the year of inquiry than I originally thought, but 2015 is a little bit more complex in that we’ve got some new rules coming in,” SMSF Association technical and professional standards director Graeme Colley told the 2015 SMSF Association National Conference in Melbourne today.

“We’ve got the exposure draft from Treasury with the look-through provisions for LRBAs and instalment warrants.”

Colley said it was a positive move as super received the benefit of the changes, however, he raised a red flag.

“But if you’re involved in LRBAs where you’ve got non-commercial loans, I’m just wondering how the Australian Taxation Office is going to rationalise that,” he said.

“Because of the way they’re looking at it at the moment from the trust arrangement, it will probably be different with that particular change if the legislation comes in [as] this change brings in a whole new protocol for examining whether the super fund might have earned excessive income.”

Further, the exposure draft to excessive non-concessional contributions was another area for practitioners to be wary of for their clients, he said.

“It’s in the parliament at the moment and the bill is quite different from the previous bill that we did see, so make sure you have a look at it,” he said.

“It’s very generous in the way it treats excess non-concessional contributions and while there is a penalty there, it’s certainly far less than what it was under the previous regime.”

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