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Senate passes new legislation on LRBAs (RG146)

A critical component of the fwgs RG146 training course is the changing landscape of LRBA’s.

Our RG146 course offers a unique and current insight into this topic because fwgs has recently contracted on a new office and a related entity has been hard at work securing an LRBA to fund about 60% of the purchase.

We have been surprised at the level of credit expertise across a wide variety of lenders including a recent SMSF Award winning lender.

We were stunned that a lender took 10 working days to complete a credit submission when all of the information requested was provided on day 1. We were prepared to be patient as this particular lender’s variable rate is over 110 basis points lower than the next best.

However, this will put pressure on every other aspect of the purchase; not to mention that the subject to finance clause was due on the day that the lender submitted the application to their credit team.

As a reminder when borrowing – an SMSF is required to establish a custodian trust and there has been some confusion about whether the holding trust is a taxable entity in its own right.

The legislation passed both the House of Representatives and the Senate on 7 September and is now awaiting royal assent.

The bill states that for taxation purposes (i.e. income tax, capital gains tax and GST) trustees treat the arrangements as if the property is held directly via the super fund.

This tidies up the method used by accountants in practice, and as long as the fund is complying and the arrangement qualifies as a LRBA, the tax uncertainties have been addressed.

An unintended consequence is the sound argument to the proposition that loans that are more favourable to SMSFs and are made at less than commercial rates are in accordance with the SMSF and tax laws!   Of course all loans should be fully and properly documented between the parties to accord with the laws pertaining to SMSFs.   So low or no interest rate loans made by a related party (you or your family trust) to your SMSF to acquire one or a series of single acquirable assets is acceptable in view of this change in the law but it is vital to seek advice.

Our RG146 course is a two-day facilitator led training program. We understand the difficulty accountants have with time so our philosophy is that we come to the accountant. Our first RG146 course is being held in NSW on October 7 and 8 and costs $1,250.00. To register please send an email to [email protected]

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