Non-Arm’s Length Income (NALI)

ATO warns about 31 January deadline for arm’s length LRBAs

The ATO has reminded SMSF trustees and professionals about the 31 January 2017 deadline to ensure Limited Recourse Borrowing Arrangements (LRBAs) are on an arm’s length basis. #SMSF trustees: Have you reviewed non-arm’s length LRBAs? Don’t forget the deadline is 31 January. Learn more at https://t.co/CaQf7YilBR pic.twitter.com/zXu0FU6wwI — ato.gov.au (@ato_gov_au)… Read More »ATO warns about 31 January deadline for arm’s length LRBAs

ATO issues new ruling on LRBA non-arm’s length income: TD 2016/16

The ATO has issued a new Taxation Determination, TD 2016/16, setting out when a non-arm’s length Limited Recourse Borrowing Arrangement could result in Non-Arm’s Length Income. The ATO has also withdrawn two earlier Interpretative Decisions, ATO ID 2015/27 and ID 2015/28, which dealt with Non-Arm’s Length Income (NALI), as “issue is… Read More »ATO issues new ruling on LRBA non-arm’s length income: TD 2016/16

Safe harbour provision for low interest rate SMSF LRBAs

safe harbour, Non-Arm's Length Income (NALI), low interest, zero interest, SMSF borrowing, LRBAsIn order to remove uncertainty surrounding low, or zero, interest rate LRBAs and the non-arm’s length income rules the Government should create a safe harbour provision.

It is unclear where the idea for 0% interest rate LRBA started, through the June 2012 meeting of the superannuation technical National Tax Liason Group was likely a key point. In this meeting the ATO was asked if zero interest rate LRBAs would breach the borrowing rules. The answer was no, but the minutes do not record if the discussion included consideration of the Non-Arm’s Length Income (NALI) rules.

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ATO ID 2014/39, 2014/40: 0% interest LRBAs & non-arm’s length income

The ATO has issued two decisions dealing with 0% interest rate Limited Recourse Borrowing Arrangements (LRBAs) leading to non-arm’s length income, ATO ID 2014/39 and ATO ID 2014/40. Update: the ATO has withdrawn these decisions, replacing them with ATO ID 2015/27 and 2015/28. Concern over 0% interest-rate LRBAs grew earlier… Read More »ATO ID 2014/39, 2014/40: 0% interest LRBAs & non-arm’s length income

ATOs stance on 0% LRBAs reinforced by more private rulings

ATO Private Binding Rulings - 0% LRBAs and non-arm's length incomeThe ATO has issued a number of new Private Binding Rulings with the view that 0% limited recourse borrowing arrangements by SMSFs will result in non-arm’s length income.

In April the ATO surprised some when it issued a Private Binding Ruling (PBR)  that said a 0% LRBA arrangement would result in the income earned from the asset being non-arm’s length income, and so taxed at 45%.

Since then the ATO has issued a number of further rulings with the same finding, indicating that it is a broader view held by the ATO rather than one only applicable to the individual situations of a particular case. Some of these private rulings seem to be for arrangements already in place, perhaps by SMSF trustees concerned that their strategies might not have the desired result?

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