The Government has reintroduced a bill that changes the way self-managed super funds report their limited recourse borrowing arrangements, with implications for the calculation of total superannuation balances.
The bill, Treasury Laws Amendment (2018 Superannuation Measures No.1) Bill 2019, amends the total superannuation balance test so that, in certain circumstances, it takes into account the outstanding balance of LRBAs. A member’s balance may be increased by the share of the outstanding balance of an LRBA entered into after 1 July 2018.
The outstanding balance is the member’s share of the amount owing under the LRBA.
The change only applies to SMSF members who have satisfied a condition of release with a nil cashing restriction, or those whose interests are supported by assets that are subject to an LRBA between the superannuation fund and its associate.
Applying the amendment to members who have satisfied a nil condition of release is designed to address the risk of using LRBAs to facilitate a recontribution strategy.
Applying it to LRBA arrangements with an associate is aimed at ensuring that the additional amount is included in a member’s total balance where there is increased risk that the terms of the LRBA are inconsistent with those that would have been entered into between independent parties.
The total superannuation balance is important because it is used to determine eligibility for a number of measures, such as the unused concessional cap carry forward rules and spouse tax offsets.
The Australian Taxation Office says the change will have an impact of SMSF reporting of LRBAs for the 2018/19 financial year.
“Until the bill receives royal assent, you should continue to report information as set out in the current SMSF annual return instructions. We will update our web content and relevant instructions when the bill becomes law.”