The changes impacting on SMSF clients with a limited recourse borrowing arrangement (LRBA) have propelled the topic to become the top adviser query in the June quarter, according to BT’s advice technical team.
BT technical consultant Tim Howard said the LRBA changes can be explained in two parts, the first relating to combining the outstanding LRBA debt to calculate a client’s total super balance, which was still only a proposal at this stage.
The second part related to the interaction between LRBAs and the transfer balance cap, Howard said.
Under this measure, SMSF clients will be required to record a credit against their transfer balance account where an LRBA held in retirement phase is repaid from funds held in accumulation phase.
Howard said this measure has broadly been introduced to prevent people transferring funds from accumulation to retirement phase via a loan repayment in an attempt to circumvent the transfer balance cap.
“This measure will likely only affect a minority of clients and it’s important to note that existing LRBAs in place prior to 1 July 2017 will not be impacted,” he noted.
“Due to the level of complexity in these measures, it’s timely to seek expert counsel so clients are aware of the changes.
“However, for now no immediate change is required to client strategies and it’s business as usual while we await any further consultation.”
