Sladen Snippet – ATO releases FAQs on the LRBA safe harbour rules

The ATO has released answers to frequently asked questions (FAQs) on the ATO’s safe harbour rules for related party limited recourse borrowing arrangement (LRBA) loans to super funds. The safe harbour rules are contained in PCG 2016/5 and have been discussed in a previous snippet.

Comments of interest in the FAQs include:

  • The ATO will not provide any safe harbours on assets other than listed shares or real estate
  • In the ATO’s view, arrangements not covered by the safe harbours must be supported by benchmarked material
  • If benchmark material cannot be obtained, in the ATO’s view, the arrangement will not be on an arm’s length basis
  • For benchmarking terms a print out from a bank website is not enough - for example the ATO notes that the terms of an offer from the bank to the super fund would satisfy their requirements
  • A mortgage under such an arrangement must be registered
  • A refinance of a LRBA loan can be with a related party provided the new terms satisfy the safe harbour terms
  • Interest is to be charged on a compounding basis not a nominal basis

This latest announcement from the ATO will make it problematic to structure an arrangement, to acquire assets other than real estate or listed shares, in a manner that satisfies the ATO. For example, for an arrangement under which a super fund borrows to buy units in a unit trust it will be very difficult for the super fund to find a commercial lender willing to give a quote under which the super fund can benchmark its related party loan against (given that most lenders are reluctant to lend to such arrangement). 

To discuss this article, or for further information please contact:


Phil Broderick
Sladen Legal
T +61 3 9611 0163  l M +61 419 512 801  
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia

Melissa Colaluca
Sladen Legal                                                                
T +61 3 9611 0161
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia