Powered by MOMENTUM MEDIA
Powered by MOMENTUM MEDIA
subscribe to our newsletter
Association warns SMSFs on emerging LRBA issue

Association warns SMSFs on emerging LRBA issue

The SMSF Association (SMSFA) has warned that SMSF trustees are becoming involved with illegal and risky limited recourse borrowing arrangements (LRBAs) involving the use of in-specie contributions.

Speaking to Mortgage Business' sister publication, SMSF Adviser, SMSFA director of technical and professional standards Graeme Colley said some SMSF trustees are making an in-specie contribution of property to their SMSF because the fund does not have the resources to purchase the property and are then attempting to transfer it into an LRBA once the asset is held by the fund.

“Auditors are picking up on this and saying [to trustees] that this just doesn’t meet the requirements of LRBA,” he said.

Advertisement
Advertisement

“The thing with illegal borrowing arrangements is you’ve got to unwind them and that can be an expensive exercise because it may involve stamp duty and certainly may involve some capital gains tax."

Mr Colley added that the ATO has been looking at a number of similar cases.

While the ATO commissioner has been quite generous in giving people a reasonable amount of time to unwind these arrangements, in cases where the tax office believes actions are part of a tax avoidance strategy, “trustees could fall into some big traps”, he said.

Mr Colley said increased surveillance of auditors by ASIC and the ATO could be one of the reasons why these types of issues are surfacing and more enquiries are coming through to the SMSFA.

“I think auditors are becoming a bit more particular about superannuation funds and they’re having a closer look at them [now] because they know that ASIC and the ATO is having much closer look at SMSF auditors,” he said.

Association warns SMSFs on emerging LRBA issue
mortgagebusiness

 

Latest News

The major bank has lowered its interest rate floor for mortgage serviceability assessments, becoming the third major bank to amend its polic...

A big four bank has announced the appointment of a new chief executive officer. ...

Digital neo-lender 86 400 has been granted a full authorised deposit-taking institution licence by APRA and expects to launch its mortgage ...

FROM THE WEB
podcast

LATEST PODCAST: A shift in serviceability requirements

Do you think the banking royal commission recommendations could negatively impact competition in the mortgage market?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.