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  • Limited recourse borrowing arrangements

    A limited recourse borrowing arrangement (LRBA) involves an SMSF trustee taking out a loan from a third party lender. The trustee then uses those funds to purchase a single asset (or collection of identical assets that have the same market value) to be held in a separate trust.

    Any investment returns earned from the asset go to the SMSF trustee.

    If the loan defaults, the lender's rights are limited to the asset held in the separate trust. This means there is no recourse to the other assets held in the SMSF.

    Note:

    • This document provides general information about our current views on issues that trustees of self-managed super funds (SMSFs) may need to take into account when considering entering into an LRBA.
    • It also provides guidance regarding the application of the Superannuation Industry (Supervision) Act 1993 (SISA), and related super rules to such arrangements.
    • This document does not deal with tax issues other than general references when discussing the application of the super law.
      Last modified: 10 Oct 2018QC 20439