Assessment of LRBAs for super reform measures

Monday 08 May 2017

The Government has released an exposure draft of legislation to include limited recourse borrowing arrangements (LRBAs) in an individual’s total superannuation balance and transfer balance cap.

Where a superannuation fund has an LRBA, it is proposed that an individual’s total superannuation balance will be increased by an amount equal to their share of the outstanding loan balance. This increase will apply regardless of whether the member is in accumulation or the retirement phase.

The draft legislation also amends the rules in relation to the transfer balance cap to create an additional credit relating to LRBAs. Where the trustee of a fund makes a payment in respect of an LRBA that increases the value of a member’s retirement phase interest, the member will receive an additional credit to their transfer balance account. The credit arises at the time of the payment and will equal the amount of the increase to their superannuation income stream.

The proposed amendments are intended to address concerns about self managed superannuation fund (SMSF) members using LRBAs to circumvent contribution caps and the transfer balance cap. The amendments are proposed to apply to new borrowing arrangements entered into on or after the first 1 January, 1 April, 1 July or 1 October that occurs after the legislation receives Royal Assent.

Comments on the exposure draft were due by 3 May 2017.

Further information

Treasury, Superannuation – Integrity of limited recourse borrowing arrangements, 27 April 2017

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