Tax concessions flagged with LRBA windups
With SMSF practitioners currently seeing a surge in demand from clients wanting to unwind their limited recourse borrowing arrangements, an industry law firm has highlighted some of cost savings and tax concessions in this process.
Townsends Business & Corporate Lawyers said it is seeing a spike in demand from SMSF practitioners wanting to unwind their clients’ limited recourse borrowing arrangements (LRBAs).
This is the process of winding up the holding trust and transferring the title to the property from the holding trustee to the fund trustee once the loan is repaid, Townsends explained in an online article.
With further changes to LRBAs currently before parliament and larger lenders withdrawing from the SMSF loans market, many SMSF clients are becoming increasingly put off by LRBA-focused strategies, according to a number of technical experts.
“If the transaction was properly structured and implemented, depending on the location of the property, the fund will be eligible for a concession or exemption on the amount of duty payable on this transfer,” the law firm said.
“While the process involves costs, the long-term savings are likely to outweigh these. For example, if the clients have no further use for the holding trustee company, it too may be de-registered - a saving of $263 a year in ASIC annual review fees.”
Once the property is in the name of the fund trustee, it can be improved or changed as desired and it is more easily transferred out as an in-specie payment to members, Townsends explained.
SMSF practitioners have been urged to take action with clients sooner rather than later with their clients, as the longer they wait, the higher the chance of losing documents that are crucial to the application for their concessional duty on the transfer.
“No supporting evidence means no concessional duty,” the law firm warned.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.