The ATO is allowing SMSF trustees additional time until 31 January 2017 to ensure that any limited recourse borrowing arrangements (LRBAs) are on terms consistent with an arm’s length dealing, or alternatively are brought to an end.
Why is the deadline being extended?
Since the issue of Practical Compliance Guideline PCG 2016/5 on 6 April 2016, the ATO has received several individual requests from SMSFs to allow them further time beyond 30 June 2016 to review the terms of their LRBA arrangements to ensure that their arrangements are on terms consistent with an arm’s length dealing.
Consideration of these individual requests has highlighted that many taxpayers may require more time in order to review the terms of LRBAs. Requests from taxpayers have also highlighted that taxpayers may benefit from further ATO guidance about some aspects of the non-arm’s length income (NALI) rules. In particular, taxpayers may benefit from further practical guidance clarifying the circumstances in which an SMSF will be taken to receive a greater amount of ordinary or statutory income under a particular non-arm’s length arrangement, compared to the amount which it would have received under an arm’s length arrangement.
This guidance may assist SMSF trustees and advisers to make decisions about whether the NALI rules apply to their particular arrangements.
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