Sladen Snippet – Non-commercial LRBA loans must be rectified by 30 June 2016

The Australian Taxation Office (ATO) has confirmed that it will not take active steps to review non-commercial limited recourse borrowing arrangement (LRBA) loans prior to 30 June 2016.

Self Managed Superannuation Fund (SMSF) trustees are being encouraged to rectify their non-commercial LRBA loans by putting them on arm’s length terms by 30 June 2016. If that occurs then the ATO has confirmed that it will not actively review such non-commercial LRBA loans in prior years. Although not expressly stated on the ATO’s website, the ATO has indicated that such rectification does not need to be retrospective.

It is therefore vital that SMSF trustees with non-commercial LRBA loans put such loans on an arm’s length basis in the coming months. Terms of an LRBA loan that should be reviewed include the interest rate, the term, loan to value ratio, security and personal guarantees. 

To find out more, please contact:

Phil Broderick
Sladen Legal
+61 3 9611 0163  |  +61 419 512 801