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ATO, Compliance & Regulation

LRBA tax treatment improved

Legislation clarifying and consolidating the tax treatment of limited recourse borrowing arrangements (LRBA) has been introduced into Parliament.

Tax and Superannuation Laws Amendment (2015 Measures No 2) Bill 2015 deals with the income and capital gains tax (CGT) relating to gearing arrangements within SMSFs.

Specifically, the legislation dictates the existence of the holding trust required for asset purchases using an LRBA is to be ignored for income and CGT purposes.

“Consequently, for income and capital gains tax purposes, the super fund will be treated as if it owned the asset held by the holding trustee,” Townsends Business and Corporate Lawyers special counsel Michael Hallinan said.

“The amendments also deal with the GST consequences of LRBAs – by deeming the super fund as incurring the GST consequences of anything done by the holding trustee.”

Hallinan pointed out the bill did not include any provisions to categorise LRBAs as a financial services derivative product.

He suggested the omission might be regarded as “possibly a case of death by silence”.

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