Update: The Tax and Superannuation Laws Amendment (2015 Measures No. 2) Bill 2015, including look-through tax treatment for SMSF LRBAs, has passed both houses of Parliament. The bill may have changed since the draft was released. Treasury has yet to publish consultation submissions received.
The Treasury has released an exposure draft of legislation to enact ‘look-through’ tax treatment of instalment warrants, including SMSF Limited Recourse Borrowing Arrangements (LRBAs).
The draft bill would amend the Income Tax Assessment Act 1997 to look-through an instalment warrant or LRBA trust so that all income tax consequences of the underlying asset would flow-through to the investor, not the trustee.
The Treasury says that “long-standing industry practice” has been to ignore the trust structure in instalment warrants and LRBAs, and treat the investor as the owner of the asset. The purpose of the exposure draft is to “remove any uncertainty about how the law applies.”