SMSFs warned on emerging LRBA issue

The SMSF Association (SMSFA) has warned that SMSF trustees are becoming involved with illegal and risky limited recourse borrowing arrangements (LRBAs) involving the use of in-specie contributions.

Speaking to SMSF Adviser, SMSFA director of technical and professional standards Graeme Colley said some SMSF trustees are making an in-specie contribution of property to their SMSF because the fund does not have the resources to purchase the property and are then attempting to transfer it into an LRBA once the asset is held by the fund.

“Auditors are picking up on this and saying [to trustees] that this just doesn’t meet the requirements of LRBA,” said Mr Colley.

“The thing with illegal borrowing arrangements is you’ve got to unwind them and that can be an expensive exercise because it may involve stamp duty and certainly may involve some capital gains tax."

The ATO has been looking at a number of similar cases, he added.

While the ATO commissioner has been quite generous in giving people a reasonable amount of time to unwind these arrangements, in cases where the tax office believes actions are part of a tax avoidance strategy, “trustees could fall into some big traps”, Mr Colley said.

The increased surveillance of auditors by ASIC and the ATO could be one of the reasons why these types of issues are surfacing and more enquiries are coming through to the SMSFA, he said.

“I think auditors are becoming a bit more particular about superannuation funds and they’re having a closer look at them [now] because they know that ASIC and the ATO is having much closer look at SMSF auditors,” he said.

Written by Miranda Brownlee
Tuesday, 06 October 2015
smsfadviseronline.com.au

Cristy Houghton

Embarketing, 48 Johnston Street, Wagga Wagga, NSW, 2650

Cristy's unique career has taken her from country NSW to the city lights of Clarendon Street South Melbourne and back again. With an early career in radio as a copywriter and creative strategist, she is now a Jill of all trades as a graphic designer, website builder, blog writer, video editor, social media manager, marketing strategist and more. 

In fact, give her any task and this chick will figure out how to do it! Go on, we dare you!

No, really, we DARE you!!

Cristy has won two Australian Commercial Radio Awards (ACRAs) for Best Ad and Best Sales Promotion, and even has an 'Employee of the Year' certificate with her name on it.

Cristy and her husband James have traveled extensively through Russia, China and South East Asia, and have two fur-babies, Sooty (cat) and Panda (puppy). Cristy loves drinking coffee, meeting people to drink coffee, coffee tasting and coffee flavoured cocktails. She also enjoys road trips, TED Talks and watching cat videos on youtube.