Driver of LRBA rule tweak a mystery

The reasoning behind the government’s proposal to include assets held under a limited recourse borrowing arrangement (LRBA) as part of an individual’s total super balance is still not clear, according to a senior technical expert.

“We’re trying to understand the need for that proposal at the moment. It seems to be that the government has got wind of some strategies there that involve using LRBAs to somehow manipulate a person’s total super balance,” Colonial First State FirstTech executive manager Craig Day said at a superannuation roundtable discussion today.

“I’ve not seen or heard anyone promote these strategies and I’ve called around to everyone I know to try to understand what their concern is and no one has been able to tell me or have seen anyone promoting such a strategy.”

Day said he did understand the assumption the government was making when looking to include these types of assets as part of a member’s total super balance.

“What they’re essentially saying there is the fund will be the beneficial owner of that asset. So even though the asset sits in the bare trust the fund is still the beneficial owner of the asset,” he explained.

“So what they’ll say is you’ll need to include in your total super balance, or your transfer balance cap value, the net value of that asset disregarding any liabilities.”

Day admitted interpretation of the proposal and how the implementation might work was difficult without having more details to assess.

To this end he said he was yet to be able to understand how an asset held under an LRBA could effectively be allocated to multiple members within an SMSF.

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