The ATO has released two ATO Interpretative Decisions (ATO IDs), being ATO ID 2014/39 and ATO ID 2014/40 on the application of the non-arm’s length income rules (NALI) to non-commercial limited recourse borrowing arrangements (LRBAs).
In each ATO ID, the ATO has determined that the NALI rules apply to the particular LRBA loan arrangement. In the first ATO ID the non-arm’s length characteristics were a 0% interest rate, a 20 year term with no periodic payments, a 100% loan to value (LVR) ratio and the lack of personal guarantees. In the second ATO ID the non-arm’s length characteristics were a 0% interest rate and an 80% LVR (when a 60-70% was deemed to be commercial).
Look out for our more extensive article on these ATO ID’s in the coming days.
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