The ATO released TD 2016/16 this week, replacing ATO ID 2015/27 and ATO ID 2015/28.
The tax determination set out how SMSFs with LRBAs can be in breach of the arm’s length arrangements and the consequences for doing so – being taxed at 47 per cent on income derived from assets acquired under these non-arm’s length LRBAs.
SMSFA chief executive Andrea Slattery said the ATO’s clarification around this complex issue will be “extremely helpful to specialist SMSF advisors in helping them give the right advice to their clients”.
“What the ATO determination highlights is the complexity around LRBAs, and this is why the association urges SMSF trustees and members to seek specialist advice when considering using this investment option,” Ms Slattery said.
“In most instances, SMSF specialists are the only advisers with the necessary skill set to understand all the implications around LRBAs, and we would urge all fund members to take advantage of their knowledge to ensure they get the best possible advice.”