New decision on LRBAs due by end of 2014

The ATO is in the process of delivering new interpretative decisions in an effort to offer further guidance material on non-commercial LRBAs.

Earlier this year, the ATO issued a private binding ruling which illustrated the significant tax implications that can potentially occur with SMSFs and zero-interest loans.

At an industry consultation meeting in late May, and following mounting industry concern, the ATO agreed to provide further guidance on the issue.

 

The ATO confirmed late last week it is now in the process of delivering two ATO interpretative decisions (ATOIDs), which it plans to complement with online content.

The ATO said it also plans to consult with industry on the draft ATOIDs in October this year.

“They agreed to provide more guidance on [at] what point a loan becomes uncommercial, and that [will] hopefully reduce the amount of private ruling requests that they were getting around these related party loans,” AMP SMSF’s head of technical, policy and educational services, Peter Burgess, told SMSF Adviser.

While this will not do away with the need for private rulings altogether, Mr Burgess said it may assist in identifying the circumstances in which a private ruling is required.

Mr Burgess said the industry also asked for clarification around improving commercial properties and the extent to which a commercial property could be improved without changing its character. The ATO has also agreed to provide guidance around this issue.

AMP SMSF welcomes guidance of this nature from the ATO, Mr Burgess said.

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