The ATO has extended the time period SMSF trustees have to comply with the new safe harbour guidelines governing non-bank limited recourse borrowing arrangements (LRBA).
Trustees will now have an additional seven months to comply with the new safe harbour guidelines and potentially avoid paying 47 per cent tax on the income generated from non-bank LRBAs classified as non-arm’s length.
When the regulator released Practical Compliance Guideline (PCG) 2016/5 “Income tax – arm’s length terms for Limited Recourse Borrowing Arrangements established by self-managed superannuation funds” in April, the compliance deadline given was 30 June 2016.
The ATO announced SMSF trustees now had until 31 January 2017 to make sure any non-bank LRBAs fall into line with the safe harbour conditions as defined by PCG 2016/5.
“We welcome this extension of time granted by the ATO,” SMSF Association chief executive Andrea Slattery said.
“The 30 June 2016 deadline was a tight deadline for trustees to take remedial action to ensure that their LRBAs were being held on an arm’s-length basis.
“Feedback from our members prompted us to request the ATO to give SMSF trustees and their advisers more time to take the necessary steps.
“This extension of time shows that the ATO is listening to the SMSF sector’s concerns as well as reinforcing why we believe it is the right regulator for our part of the superannuation industry.”