Limited recourse borrowing arrangements - what you can and can't do paper

Published on 22 Aug 12 by VICTORIAN DIVISION, THE TAX INSTITUTE

There has been significant uncertainty in relation to limited recourse borrowing arrangements (LRBA) since they were introduced in the Superannuation Industry (Supervision) Act 1993 in 2007. With the release of the Commissioner of Taxation's ruling, SMSFR 2012/1, and the Government's announcement in relation to the tax treatment of LRBAs, SMSFs can now have some level of comfort in how LRBAs can be structured. This paper examines what SMSFs can and can't do under a LRBA, including:

• When will an asset be a single acquirable asset?
• What are repairs, maintenance and improvements of an asset and why the distinction is important
• What sort of improvements can be made to an asset before the arrangement becomes noncompliant?
• Using a unit trust structure in conjunction with a LRBA
• Case studies involving various LRBAS.

Author profile

Robert O'Donohue CTA

Robert, O'Donohue, FTI, is a Partner in HWL Ebsworth's National Superannuation and Funds Management Group and advises clients across the whole superannuation industry. Robert has acted for many of the better known APRA regulated superannuation funds in Australia together with many SMSFs and advises across the whole spectrum of issues faced by superannuation funds from compliance and trustee duties to disclosure and outsourcing arrangements. - Current at 24 August 2012

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