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LRBAs and total superannuation balance

Last updated 6 December 2022

How to work out a member's share of the outstanding balance of a limited recourse borrowing arrangement (LRBA) for their total superannuation balance (TSB).

LRBA amount for TSB

From 1 July 2018, SMSFs that have a LRBA in place must include a member's share of the outstanding balance of the LRBA, referred to as the LRBA amount, at 30 June each income year in their TSB when specific criteria are met. This also applies to an intermediary LRBA, where the loan is entered into by the trustee of the separate asset holding trust.

This applies if the LRBA was:

  • entered into by the fund on or after 1 July 2018, or
  • entered into by the fund before 1 July 2018 and is refinanced on or after that date, unless the following apply  
    • the new borrowing is secured by the same asset or assets as the old borrowing
    • the refinanced amount is the same or less than the existing LRBA.
     

Reporting of the member's LRBA amount is only required if either of the following applies:

If the fund has an impacted LRBA and a member has met either of the above criteria, the fund must report the LRBA amount at 30 June in that member‘s information section of the SMSF Annual return and include it in the member's TSB.

LRBA is between the fund and an associate of the fund

An associate of the superannuation fund covers any entity that benefits under a trust (for example, the members of a super fund), as well as the associates of those entities.

Where the adjustment applies because the LRBA is with an associate of the fund, all members whose interests are supported by the assets the LRBA relates to will have their TSB adjusted.

Meeting a condition of release with a nil cashing restriction

The conditions of release with nil cashing restrictions that apply are:

  • retirement
  • terminal medical condition
  • permanent incapacity
  • attaining 65 years.

Where a fund has to report an LRBA amount because a member has satisfied a nil condition of release, it will be included in the calculation of the member's TSB but not other members who have not satisfied such a condition of release, despite the fact that their interests may be supported by the same assets the LRBA relates to.

LRBA and TSB flow chart questions

The LRBA and TSB flow chart questions below provides steps to help you work out whether your TSB is increased by an LRBA amount.

You should follow these flow chart questions each 30 June to determine the impact on your TSB.

Question 1: Was the contract for the current LRBA entered into before 1 July 2018?

Yes

an outstanding LRBA amount is not included in your TSB

No

Go to Question 2

Question 2: Is the current LRBA a refinancing of an existing LRBA that was entered into before 1 July 2018?

Yes

Go to Question 3

No

Go to Question 5

Question 3: Is the refinanced LRBA secured by the same asset/s as the original LRBA?

Yes

Go to Question 4

No

Go to Question 5

Question 4: When the LRBA was refinanced, did it increase the borrowed amount?

Yes

Go to Question 5

No

An LRBA amount is not included in your TSB

Question 5: Is the lender of the LRBA an associate of the SMSF?

Yes

Your LRBA amount is included in your TSB

No

Go to Question 6

Question 6: Have you met any of the following conditions of release at any point in time?

  • Retirement
  • Attained 65 years old
  • Terminal medical condition
  • Permanent incapacity.

Yes

Your LRBA amount is included in your TSB

No

An outstanding LRBA amount is not included your TSB

Outstanding LRBA amount included in your TSB

When you need to include your share of the outstanding amount of an LRBA in your TSB, the amount is a proportion of the total outstanding balance based on your share of the super interests supported by the LRBA. The proportion is calculated by determining the ratio of the total super interests supported by the borrowing that are attributable to you.

Example: working out the LRBA amount included in a member’s TSB

Kevin is aged 65 years old and is a member of an SMSF with an outstanding LRBA as at 30 June.

Kevin is calculating his TSB for 30 June 2019 and needs to know his share of the outstanding LRBA amount to include in the calculation of his total super balance.

Kevin's account balance at 30 June is $400,000 which is 75% supported by the assets that secure the LRBA.

The SMSF’s total outstanding balance of the LRBA at 30 June 2019 is $200,000 and the total fund assets that are supported by the assets that secure the LRBA is $800,000.

Kevin works out his LRBA amount at 30 June 2019 as following:

  • Outstanding LRBA balance × (value of Kevin’s interests supported by the assets that secure the LRBA ÷ value of fund's interests supported by the assets that secure the LRBA)
  • $200,000 × ($400,000 × 75%) ÷ $800,000 = $75,000.

Kevin’s SMSF will report $75,000 as the LRBA amount for Kevin in the member section of the SMSF annual return for the 2018–19 financial year.

End of example

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