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  • Intermediary LRBA legislative instrument now registered

    The public consultation period for the draft legislative instrument about intermediary limited recourse borrowing arrangements (LRBAs) closed on 13 March 2020. Minor feedback was received during consultation which was taken into consideration when finalising the legislative instrument.

    The finalised legislative instrument and accompanying explanatory statement, titled Superannuation Industry (Supervision) In-house Asset Determination – Intermediary Limited Recourse Borrowing Arrangement Determination 2020 was registered on 19 May 2020. The legislative instrument is relevant to the trustees of self-managed super funds (SMSFs) who enter into a specific type of LRBA arrangement called an intermediary LRBA.

    The intermediary LRBA covers an arrangement involving an SMSF, a holding trust, and a lender. Under this arrangement, the trustee of the holding trust borrows money as principal from a lender to acquire a single acquirable asset, but the SMSF maintains the holding trustee’s borrowing. This means the SMSF borrows indirectly through the holding trustee.

    The purpose of the legislative instrument is to exclude a SMSF’s investment in the holding trust from being an in-house asset but only if the intermediary LRBA meets certain requirements described within the instrument. The legislative instrument applies to intermediary LRBAs established from 24 September 2007 and to those that might be established in the future.

    SMSF professionals and trustees should ensure any intermediary LRBA complies with the requirements set out in the legislative instrument to avoid any breaches of the super laws. If any uncertainties arise in relation to a SMSF’s compliance with the legislative instrument, trustees can request SMSF specific advice.

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      Last modified: 20 May 2020QC 62684