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Articles
Impending GST changes good news for SMEs
SMSF related-party borrowing arrangements
Primary Producer Income Tax Averaging
Active vs passive assets and the small business CGT concession
ATO issues further taxpayer alerts on key focus areas
Borrowed money to pay a business tax debt? Is the interest deductible?
Online Selling
The dangers of income splitting
Clients failing on depreciation front - property investment
Home office deductions: What substantiation will the ATO accept?
ATO advises accountants on client data swoop
ATO issues stern reminder on new backpacker tax
Debt Recovery
Government takes next step in tax cheats crackdown
Car salary packages and the deductibility of after-tax running costs
Choosing an Executor
ATO fires warning shots at cash economy exploiters
Getting a tax valuation from the ATO
5 tips to get home office deductions right
SMSF related-party borrowing arrangements

Will a borrowing arrangement by a SMSF pass the smell test?



       



The Australian Taxation Office (ATO) has issued a taxation determination concerning non-arm’s length income (NALI) of a self managed super fund (SMSF) when the parties to a scheme have entered into a limited recourse borrowing arrangement (LRBA) on terms which are not at arm’s length.  If you fail this smell test the tax rate becomes 47%.


The ATO has also updated a practical compliance guideline which sets out the Commissioner’s “safe harbour” terms for LRBAs. If an LRBA is structured in accordance with the guideline, the ATO will accept that the LRBA is consistent with an arm’s length dealing and the NALI provisions (47% tax) will not apply. 


Trustees who do not meet the safe harbour terms will need to otherwise demonstrate that their LRBA was entered into and maintained consistent with arm’s length terms.


 


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20th-March-2017