In light of the ATO’s new guidance on related party loans, AMP SMSF has urged trustees with suspect arrangements in place to amend them as soon as possible and get in touch with the ATO for further guidance.
Late last week, the ATO released ATO ID 2014/39 and ATO ID 2014/40 which set out the ATO’s view that the non-arm’s length income (NALI) provision applies to the non-commercial limited recourse borrowing arrangements (LRBAs) involving related parties in those cases.
Speaking to SMSF Adviser, AMP SMSF’s administration head of technical services Phil La Greca said while this clarification is “what the industry has been looking for,” there remains a question mark over how trustees who currently have non-commercial loans in place will be treated by the ATO.
Mr La Greca suggested a good starting point for those trustees would be to bring their current arrangements in line with the new LRBA guidance, and seek the advice of the ATO on how to proceed.
Mr La Greca also stressed the ATO’s new guidance won’t necessarily spell the end to related party loans, it should address the more “questionable” behaviour with these arrangements.
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