Last chance for non-arm’s length related party LRBAs
The ATO has released a taxation determination regarding how it will apply the non-arm’s length income (‘NALI’) rules to income generated from assets purchased by an SMSF using a related party ‘limited recourse borrowing arrangement’ (or ‘LRBA’).
Although the ATO states that: “in some very limited circumstances, the NALI provisions may not apply to an arrangement, even though it’s not on arm’s length terms”, in their opinion, for the vast majority of cases, if there is an LRBA that is not at an arm’s length terms, NALI will arise and the income may be taxed at the highest marginal tax rate of 47%.
Editor: Importantly, the ATO has given SMSFs until 31 January 2017 to ‘get their house in order’. This means that all SMSFs with related party borrowings should review the terms of those borrowings by 31 January 2017 to consider whether they are ‘arm’s length’. Please contact this office if you would like any assistance in this regard.
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**Disclaimer: The information is sourced through NTAA**
For tax help, please call Hart Partners today:
Phone (03)9600 3220 Mobile: 0413 222 922 Fax (03) 9376 3507
or email us paula@www.hartpartners.com.au.
| Please Note:
Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. |