SMSF Borrowing Loan Refinance

Currently fund has a bank lender and the refinance will not require the asset to transfer to a new security trustee

$1,450

Currently fund has a related party lender and the refinance will not require the asset to transfer to a new security trustee

$1,850

The refinance will require the asset to transfer to a new security trustee

POA

* Add $75 for hard copy per arrangement.

Section 67A(1)(a)(ii) of the Superannuation Industry (Supervision) Act 1993 (Cth) allows for the refinance of a limited recourse borrowing arrangement loan. The DBA loan refinance package provides the necessary documents to refinance such a loan. It includes:

Letter

Trustee minutes

Loan agreement

Where an SMSF trustee has borrowed from a non-bank lender in connection with an LRBA, the ATO has confirmed its view that any income (including any net capital gains) derived in connection with the LRBA will be non-arm’s length income and accordingly, taxed at the highest marginal tax rate (plus any applicable levies), unless the loan is on arm’s length terms.

To assist SMSF trustees, the ATO has released PCG 2016/5, which sets out ‘safe harbour guidelines’ that effectively provide a standardised set of loan terms that in the ATO view equates to arm’s length terms for real property and listed shares and list units.

Those who are concerned might consider changing the terms of the related party loan to replicate the safe harbour guidelines or to ensure that the parties are in the same position they would have been in had they dealt at arm’s length.

We note that the ATO has stated that it will generally not consider the income derived from a LRBA to be non-arm’s length income where the LRBA was put on complying terms by 31 January 2017 and the requisite principal and interest repayments are made from 1 July 2015 onwards. Where this deadline has not been met, you may wish to consider approaching the ATO to discuss the SMSF’s position.

Any information provided on this website (including any blog posts) are mere summaries and general information provided for educational purposes only. This is no substitute for expert advice. Anyone seeking to rely on this content should obtain expert advice to confirm particular issues especially as the law is subject to ongoing changes and substantial penalties can be imposed.

As a law firm DBA Lawyers Pty Ltd is not licensed to give financial product advice under the Corporations Act 2001 (Cth).

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