CALL US: (07) 3367 0999 | EMAIL US:

SMSF deadline approaches for limited recourse borrowing arrangements

SMSF trustees have until 31 January 2017 to review their limited recourse borrowing arrangements (LRBAs) to ensure they are consistent with an arm’s length dealing, or alternatively brought to an end if they are not.

The Tax Office recently provided further guidance to SMSF trustees on when the non-arm’s length income (NALI) provisions apply to an SMSF’s LRBA in their Practical Compliance Guideline (PCG 2016/5) and Taxation Determination (TD 2016/16).

When determining whether the NALI provisions apply, SMSF trustees must recognise it is a two-step process. First, it needs to be determined whether:
1. The terms of the LRBA are consistent with the safe harbours in PCG 2016/5
2. The SMSF trustee can otherwise demonstrate that they are arm’s length.

If the borrowing arrangement is on arm’s length then SMSF trustees do not have to consider TD 2016/16 and the ATO will not apply the NALI provisions.

However, trustees with an LRBA on terms that are non-arm’s length will need to consider TD 2016/16. Trustees will need to consider the second limb of the NALI provisions and whether or not the income the fund obtains under the arrangement is greater than it would otherwise have been.

SMSF trustees should be aware that TD 2016/16 is not an alternative to the safe harbours set out in PCG 2016/5 and only applies if borrowing terms of an LRBA are non-arm’s length.

Business
advice

taxation
planning

compliance
services

News

Superannuation for Women

January 18, 2019

It’s no secret that the median super balance for Australian women at the time of retirement is significantly lower than that of their male counterparts. The Australian Commission & Investments Commission (ASIC) have reported that men retire with about twice the amount as women. The discrepancy is reportedly even higher between Mums and Dads. Between lower wages and a higher likelihood of having an interrupted working life for women, women also tend to live longer and thus require more super to cover more years. Unfortunately, between personal finances, business financial capabilities, and governmental policies, actions to close this gap can be limited.

Where viable, private companies can consider: