The self-managed superannuation funds sector has been urging the Government not to throw the baby out with the bathwater with respect to limited recourse borrowing arrangements (LRBAs).
Submissions filed with the Treasury ahead of this year’s Federal Budget made it clear that while the SMSF sector appreciated the need for the Government to close off loopholes with respect to LBRAs, it also needed to avoid unintended consequences.
The SMSF Association went so far as to note that the “mischief” the Government was seeking to prevent occurred when SMSF members withdrew funds from their SMSF tax-free and then used an LBRA to return that money to the fund whilst in the meantime making non-concessional contributions.
It said this required the SMSF member to be able to receive benefit payments from the funds and use a related party LRBA to ensure that they were in the same economic position but had effectively reduced their total superannuation balance.
The SMSF Association suggested that in such circumstances the Government needed to better target its strategy for closing off the loophole by restricting the changes to related party LRBA or banning related party LRBAs from 1 July onwards.
It warned that other measures being contemplated by the Government would increase complexity and have harsh consequences for SMSFs intending to use an LRBA.
