In an update on our previous Sladen Snippets (see here and here), the ATO has announced that the date for rectifying non-commercial related party limited recourse borrowing arrangement (LRBA) loans made to SMSF trustees has been extended from 30 June 2016 to 31 January 2017. This extension is to enable SMSF trustees more time to rectify non-commercial loans including to alter the terms to ensure they comply with the safe harbours or with a benchmarked loan (including to make payments of interest or principal) or alternatively that such loans are refinanced or repaid.

SMSF trustees who wish to place their related party LRBA loans on commercial terms will be able to rectify the terms of the loan and make any necessary payments of interest or principal for the 2015/16 year by 31 January 2017. This could be, for example, to reduce the loan to value (LVR) of such loans. Importantly, this will give SMSF trustees time to see if the proposed lifetime non-concessional contribution caps announced by the Government in the budget are enacted.

In addition, the ATO has announced that it “will provide further information and illustrative examples to assist SMSF trustees and advisers to make decisions about relevant arrangements” by 30 September 2016. The ATO has also reinforced that it will “not select an SMSF for an income tax review purely because it has an LRBA for the 2014-15 income years” if the non-commercial related party LRBA loans are rectified by 31 January 2017.

For further information or advice please contact:

Phil Broderick
Principal
T: 03 9611 0163
M: 0419 512 801
E: pbroderick@sladen.com.au

Melissa Brazzale
Associate
T: 03 9611 0161
E: mbrazzale@sladen.com.au