As noted in our previous snippet, the ATO has set 31 January 2017 as the date for rectifying non-commercial related party limited recourse borrowing arrangement (LRBA) loans made to SMSF trustees. With that date fast approaching it is important that SMSF trustees look to rectify any outstanding related party non-commercial LRBA loans in the next couple of weeks.
In order to rectify a non-commercial LRBA loan an SMSF trustee will need, by 31 January 2017, to either:
- Bring the loan terms in line with the safe harbour terms under the ATO’s guidelines with effect for the entire 2015/16 year (including that interest and principal for the 2015/16 year must be paid); or
- Refinance the loan through a commercial lender (however, the loan must still be put on a commercial basis for the 2015/16 year – including the payment of interest and principal for that year up until the time of the refinance); or
- Repay the LRBA loan (however, again, the loan must still be put on a commercial basis for the 2015/16 year – including the payment of interest and principal for that year up until the time of the repayment).
To discuss this article, or for further information please contact:
Phil Broderick
Principal
Sladen Legal
T +61 3 9611 0163 l M +61 419 512 801
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: pbroderick@sladen.com.au
Melissa Colaluca
Associate
Sladen Legal
T +61 3 9611 0161
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: mcolaluca@sladen.com.au
