The Australian Taxation Office (ATO) is working towards addressing any in-house asset concerns regarding self-managed superannuation funds (SMSF) in relation to the settlement of limited recourse borrowing arrangements (LRBA).
Currently, if an LRBA is settled and the asset acquired under the arrangement is kept in the holding or security trust and not transferred into the SMSF, the holding or security trust may constitute an in-house asset.
Harwood Andrews Lawyers principal Rob Jeremiah said trustees in some states preferred to keep the asset in the security trust to avoid paying stamp duty charged on the transfer to the SMSF.
However, this situation is about to receive some much welcome clarification from the ATO.
“At the last NTLG (National Tax Liaison Group) meeting … we talked about developing a legislative instrument to actually switch off the in-house asset problem,” ATO assistant commissioner for superannuation Stuart Forsyth said last week.
“So what we’re aiming to do is switch off the in-house asset provisions provided the asset is still held in the trust and no other activity takes place. I mean if the trustees start share trading or CFD (c
ontracts for difference) trading in the trust, then all bets will be off.
“That will take us some time to do.”
Forsyth, who spoke at last week’s Small Independent Superannuation Funds Association SMSF Forum, said the regulator recognised the need to take action in this area as even if the current rules were obeyed, reality dictated the transfer of the asset from the holding trust to the SMSF was unlikely to happen all at the same time.
Instead, the process is likely to stretch over a few days at least, with the effect of potentially triggering in-house asset issues for trustees.
By Darin Tyson-Chan