The federal government’s next exposure draft legislation, which will determine whether assets held under a limited recourse borrowing arrangement (LRBA) will be counted towards an individual’s total superannuation balance and transfer balance cap, is creating nervousness across the industry because it could result in more complex issues to work through.
SMSF Owners’ Alliance executive director Duncan Fairweather said he expected limited opportunity to properly analyse the next exposure draft, just as past draft legislation and consultation periods had been rushed.
“This is concerning because one of the measures is about taking gross asset values into account in relation to the total transfer balance cap and this may have implications for SMSFs which have borrowed via LRBAs to invest in assets to grow their future retirement income,” Fairweather told selfmanagedsuper.
SMSF Association head of policy Jordan George said he believed there would be more issues to work through with these amendments due to the nature of the LRBA changes being so unexpected and also potentially being changed so close to 1 July.
“Treasury will be releasing another set of draft amendments in the next few weeks, so if there are going to be changes as to how assets under LRBAs are counted towards the total super balance calculation and the transfer balance cap credits and debits, then we really do need people to have the appropriate time to understand those changes and provide time for them to adjust their strategies,” George said.
While he said he did not know the origin of the proposal, he believed it was designed to be an integrity measure.
“The government has concerns that people could use LRBAs to get around the policy intent of transfer balance caps or total superannuation balance restrictions on non-concessional contributions, so that’s probably come to their attention and they want to close any loopholes there,” he noted.
“We understand that they want to make sure the law works with integrity, but we don’t want it to be done in such a way that it’s disruptive to people who already have LRBAs as a legitimate super-building strategy.”