ATO Releases Another Backflip, But This Time In Our Favor

The ATO have just released The Superannuation Industry (Supervision) In-house Asset Determination – Intermediary Limited Recourse Borrowing Arrangement Determination 2020.

Under this determination it now appears that the ATO have done another backflip. Previously they have not allowed the bare trustee to borrow under a bare trust arrangement but have insisted on the fund trustees borrowing.

A lot of clients have been forced to unwind arrangements and a well known promoter called Charterhill was putting clients into arrangements and getting the bare trustee to borrow. The ATO have usually required these clients to unwind the arrangement.

SMSF Property Promoter Pleads Guilty – Tharshini Ashokan, SMSMagazine

Now it appears that with a properly structured arrangement you can actually get the bare trustee to borrow on a full recourse basis and this will be acceptable to the ATO.

I do note however that the lender needs to be fully aware of the fact that it is really the SMSF borrowing and not the bare trustee. In the Charterhill case the bank was apparently not aware that there was any SMSF involved (in 160 cases!!!)

This may lead to a situation where mainstream lenders may come back into the market. There is one promoter of this product that I am aware of and they seem to be charging more for this structure than a normal LRBA. I am unsure as to the benefit of using it if it is more expensive.

Intermediary LRBA Legislative Instrument Registered – Adrian Flores, SMSFAdviser