The ATO has long insisted that once a limited recourse borrowing
arrangement (LRBA) has been fully repaid, the property must be
transferred to the trustee of the SMSF, otherwise the investment
will be an in-house asset (and for most SMSFs this will present
compliance challenges). This has resulted in SMSFs incurring
unnecessary expenses as a result of having to formally transfer the
property, together with double duty in some cases.
The ATO has released a draft legislative instrument that
proposes to extend the in-house asset exemption to LRBAs once the
loan has been fully repaid. This means that the property will no
longer need to be transferred to the trustee of the SMSF when the
loan has been repaid.
However, for this proposed exemption to apply, the asset held on
trust must continue to be a 'single acquirable asset'. This
means that the existing limitations on changing the asset continue
to apply. If, for example, the trustee of the SMSF wishes to
develop the asset, it must first be transferred to the trustee of
the SMSF, otherwise the investment will be an in-house asset.
The draft instrument also includes an exemption to the in-house
asset rules for LRBAs that are established but the borrowing has
not yet begun or the asset is not yet held. This exemption is
critical as the current exemption does not apply where:
the SMSF borrows to pay a deposit, but has not yet acquired the
there is a time delay between establishing the bare trust and
settling the contract to acquire the asset, such as off the plan
If it is given the go ahead, these exemptions will apply
retrospectively from 24 September 2007, the date from which the
Superannuation Industry (Supervision) Act 1993 was amended
to allow limited recourse borrowing arrangements.
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Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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