LRBAs don’t pose risks to the super system but issues may arise at the individual SMSF level due to high assets concentrations via borrowings.

A group of government regulators has found LRBAs do not pose any significant risk to the superannuation sector.

The acquisition of properties with associated assets under an LRBA can create the need for SMSF trustees to create more than one bare trust.

An SMSF can borrow from another entity that has also borrowed money as long as each arrangement is kept separate from the other.

SMSFs seeking evidence a related-party LRBA interest rate is on commercial terms should also check the entire borrowing contract falls under the same standard.

SMSF trustees with LRBAs should be reviewing their repayments and investment strategy as borrowing rates increase from 1 July.