New duty exemption for limited recourse borrowing arrangements on transfer from bare trust to SMSF

Self-managed superannuation fund (SMSF) trustees and their advisers should be aware that there is a new duty exemption in Queensland for property transfers from a custodian (bare trustee) to the SMSF trustee. While the amendment is recent, it applies retrospectively from 26 October 2011.

Under the new exemption, a transfer from the custodian to the SMSF trustee is exempt from duty if the property is held on trust in compliance with section 67A(1)(b) of the Superannuation Industry (Supervision) Act 1993 (Cth). The exemption is not available if the transfer is part of an arrangement where the property ceases to be held as fund property or there is a change in the interest of the fund members.

This reinforces that:

• it is crucial for SMSF trustees to get their documents right from the very outset and ensure they comply with section 67A(1)(b); and
• SMSF trustees should ensure the documents are kept in a safe place as they will need to produce these documents to the Commissioner when they have repaid the loan and are transferring the property from the custodian.

Given the ATO’s view that once the borrowing is paid out, the custodian must transfer the property from the custodian to the SMSF trustee, this new exemption provides some comfort for SMSF trustees and their advisers. Previously, trustees had to make a detailed submission to the Queensland Revenue Office to obtain a discretionary exemption and otherwise were liable for full transfer duty.

If you have any queries about this alert, please contact a member of our superannuation team.