Two-month window for LRBAs: lawyer

SMSF clients who are currently considering entering into a limited recourse borrowing arrangement (LRBA) should seek to settle before 30 June 2018 to minimise the risk of being caught by the federal government’s new Superannuation Taxation Integrity Measures.

Townsends Business and Corporate Lawyers superannuation special counsel Michael Hallinan warned the proposed introduction of the new measures will affect all LRBAs entered into on or after 1 July.

These measures, if implemented, will include a member’s share of any outstanding LRBA debt in the calculation of their total super balance, which may affect the member’s ability to make contributions, including catch-up contributions, Hallinan said.

“Matters will be a little more complicated for off-the-plan purchases as there is no drawdown of the loan until the property is close to completion, which may be in one or two years’ time,” he noted.

“While at the moment there is no exception available for this type of transaction, the consultation paper does raise the possibility of transitional rules being instated for LRBAs, which straddle 1 July 2018.”

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