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New LRBA reporting requirements unclear

new LRBA reporting requirements

New LRBA reporting requirements linked to a new superannuation bill may be self-defeating because the ATO is looking to capture too much information.

The new reporting requirements for limited recourse borrowing arrangements (LRBA) contained in a new superannuation bill are confusing compared to what the legislation is designed to achieve, a senior technical specialist has said.

The federal government tabled the Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2019 in parliament yesterday and SuperConcepts technical services and education general manager Peter Burgess noted the ATO has introduced a new subsection in the SMSF annual return with regard to the measure.

This measure would allowing the ATO to capture information on whether a fund had entered into an LRBA after 1 July 2018 and the borrowing was a related-party loan or the member associated with the gearing facility had met a condition of release due to the impact this would have on a member’s total super balance (TSB).

Burgess pointed out the actual information requested in the annual return instructions goes beyond this aim and that could compromise its usefulness. Under the bill, trustees are required to report outstanding loan balances for all LRBAs, not just those that would have been caught by the proposed changes for TSB purposes.

“One thing I can’t work out is how they are going to use that information now if this measure gets passed into law, and we think it will, and how they will work out who’s got a related-party loan,” Burgess told delegates at the SMSF Professionals Day 2019, co-hosted by selfmanagedsuper and SuperConcepts, in Melbourne today.

He revealed there appears to be a mechanism on the return to provide better specificity on the matter, but questioned how effective it would be.

“There is a question on the SMSF annual return that says ‘Is your loan from a licensed lender?’ but that doesn’t necessarily mean if you say no to that, it doesn’t necessarily mean it is a related-party loan,” he noted.

“We’ve got clients who have loans from friends. They’re not from a licensed member, but they’re not from a related party either.

“So it’s not clear to us as to how the information they’re gathering here will allow the ATO to determine which loans will need to be added back to a member’s total super balance.”

The regulator had previously stated the information on SMSF borrowings was for statistical purposes only and due to the inherent confusion over the reporting requirement, further ATO clarification will be issued.

“What we may see is once this is passed into law they may amend the instructions to say: ‘We don’t need this for everyone. Just tell us this for any related-party loans or for situations where a member has satisfied a condition of release,’” Burgess said.

Further, the date from which the bill takes effect was not amended, which may cause separate issues for SMSFs that have already reported.

The bill introduced into parliament yesterday contains a number of measures contained in a similar bill that lapsed in the lead-up to the May federal election.

However, the super guarantee amnesty for employers who had fallen behind in their employee superannuation contributions was excluded from the new bill. This was the item that prevented Labor from supporting the previous bill and with its exclusion a speedy passage through both houses of parliament is expected.

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