Treasury releases proposed measures to include LRBAs in total superannuation balances

A Treasury consultation paper issued on 11 January 2018 includes new integrity measures, one of which will affect SMSFs entering into new borrowing arrangements (LRBAs) after 30 June 2018.

The proposal is that, where an amount is outstanding under an LRBA, there will be an additional amount added to a member’s ‘total superannuation balance’. Broadly, this will be the proportion of the assets funded by the borrowing that relate to that member’s account.

Treasury’s concern is that SMSF members will withdraw money from their SMSF and then loan it back, which means a member’s total superannuation balance reduces by the amount withdrawn while the effective amount invested does not.

Increasing a member’s total superannuation balance affects the ability to make further superannuation contributions, and whether the catch-up of unused concessional contributions is available.

The rules are proposed to apply from 1 July 2018, and then only to new borrowings after that date.

Submissions on the proposals and exposure draft of the legislation are due by 9 February 2018.

This will be among the topics we discuss at our Annual SMSF Conference on 15 March. Click here for more details.

If you would like further information about this, please contact a member of our super team.