LRBA News: The Government has now released its response to the 2014 Financial System Inquiry.
Importantly they will not go ahead with the recommendation to prohibit limited recourse borrowing arrangements (LRBAs) by SMSFs.
New and existing LRBAs will continue to operate under existing rules for at least the next 3 years, at which time the ATO will report back to the Government on the level of leverage and risk within the system.
What should you do?
There is no need for panic, however… Do take the opportunity to review your SMSF clients’ LRBA arrangements.
As we highlighted in our recent blog, LRBAs can be a minefield – with serious taxation consequences if you get it wrong.
Other risks associated with LRBAs for trustees:
- Non Arm’s Length Dealings with related parties resulting in top marginal tax being applied to income, and penalties levied on Trustees.
- Non-allowable changes to underlying asset resulting in the borrowing arrangement breaching section 67 – resulting in potential fines and penalties to Trustees.
To help you, we’re offering a FREE compliance review of up to three of your client’s LRBA arrangements. This will include a report outlining recommendations to correct any potential breaches of the rules.
Please email firstname.lastname@example.org or call our office on 1300 TRISUP to take up this offer or discuss any questions you may have.