Following the ATO's release of two interpretive decisions last year on SMSF borrowing and commercial loan arrangements, one industry lawyer has said the way the decisions are going to be implemented remains unclear.
Michael Hallinan, Townsends Business & Corporate Lawyers special counsel for superannuation, said since the introduction of ATO ID 2014/39 and ATO ID 2014/40 in December it is still unclear what SMSFs with these non-commercial arrangements can do and in what time frame these arrangements must be addressed.
“What can they do? Do they restructure them? Remove the offending elements in the hope that the ATO will accept the loans are commercial for the current financial year,” Mr Hallinan told SMSF Adviser.
The ATO needs to provide an accompanying statement specifying if this is the treatment of non-commercial borrowing arrangements from this point forward or if this treatment will also apply to preceding financial years, he said.
“There was no guidance from the ATO as to whether there is a grace period, or if it needs to be fixed up by a certain date, or if you fix it up in respect to this current financial year or that they’re not going to look at previous financial years,” said Mr Hallinan.
“There were no transitional arrangements – there should be a grace period to allow adjustment.”
Mr Hallinan said comments from the ATO prior to the interpretative decisions had been “very favourable to these types of arrangements”.
“The IDs released in December represented a 180 degree turnaround in attitude from the ATO from statements it made two years ago,” he said.
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