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LRBA measures tipped to limit SMSF loans
The proposed measures for limited recourse borrowing arrangements may lead to complex and “messy arrangements requiring constant attention from accountants” and will impede the attractiveness of SMSF loans, according to the Tax Institute.
Last week Treasury released a consultation paper on two measures for limited recourse borrowing arrangements (LRBAs), one of which would see the outstanding balance of an LRBA count towards a member’s total super balance.
The Tax Institute senior tax counsel Bob Deutsch said both of Treasury’s proposed measures for LRBAs will add significant complexity to the legislation.
While he doesn’t believe it is the government’s intention to end loan arrangements in SMSFs through the proposed policies, he expects that it will diminish the attractiveness of entering these arrangements.
“What will happen is that people who want straightforward arrangements will be discouraged from entering limited recourse borrowing arrangements because they are getting more complicated – there are more checks and balances around,” he explained.
“It will have the effect of making these kinds of arrangements less attractive, particularly for those who don’t want to get into messy arrangements that need constant attention from accountants and I think that is part of the risk with this.”
The government, he believes, is attempting to control these arrangements more through these measures and make them more consistent with the new laws that were introduced.
“I think it is going to limit the number of these loan arrangements,” he said.
Miranda Brownlee
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 also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
The banks have totally disregarded the fact that these loans were meant to be limited-recourse to the asset themselves. They arent able to tie up any of the other assets of the fund but require personal guarantees from directors for all their personal assets. And then they still want to charge a premium for loans that sit at a 60-70% LVR. No wonder people think banks are bastards.0- The government really needs to make up its mind. Clearly they don't want LRBAs as shown by the creation of the most stupidly complex rules in the history of SMSFs. So either just ban loans altogether or allow loans in a simple manner without the BS of bare trusts and the ridiculous complexity. If they stop reducing the contribution caps, people won't be tempted to find ways to circumvent them.0
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