The income tax look-through treatment for limited recourse borrowing arrangements (LRBAs) is now law with the Tax and Superannuation Laws Amendment (2015 Measures No 2) Act 2015 receiving royal assent on 16 September 2015. This means that, effective from 1 July 2007, a super fund under a LRBA will generally be treated as the owner of an asset bought under the arrangement for income tax purposes (including for capital gains tax purposes). This includes that the bare trust under an LRBA does not need a tax file number and does not need to lodge a tax return.
The measure does not apply to the GST or the ABN regimes. Therefore, in our view, a bare trust continues to be the preferred trust structure for an LRBA.
In addition to the above measure, the ATO has announced that it will extend the application of the look through approach to LRBAs entered into before 24 September 2007 (when the original LRBA rules came into force) provided the instalment trust criterion in paragraph 235-825(1)(b) would be satisfied if the arrangement were entered into after this date. It should be noted that this is an administrative treatment only and that the ATO has warned that if asked to state its view formally it will do so as it understands the law to operate (ie presumably that the look through approach does not apply).
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