The proposal casted concerns for SMSF members who had entered into a contract for the purchase of an asset using a limited recourse borrowing arrangement (LRBA) prior to budget night, with settlement after budget night.
In these situations, SMSF members would provide part of the sale proceeds using nonconcessional contributions to the fund to enable the fund to complete the contract.
The Treasurer has since announced that transitional provisions will apply to SMSF members with these existing financial arrangements to allow for further nonconcessional contributions to enable the pre-existing contract to be completed. These additional non-concessional contributions will count towards the lifetime non-concessional cap, but will not result in an individual breaching the lifetime non-concessional cap.
Transitional arrangements will also apply to SMSFs with existing borrowings, including LRBAs, until 31 January 2017. SMSF members with existing borrowings will be permitted to make further non-concessional contributions to the extent necessary to ensure the legal obligations of the SMSF that existed on or before Budget night are met or comply with the ATO’s Practice Compliance Guideline 2016/5 (PCG 2016/5).
Once legislated, this deadline will be extended only in exceptional circumstances and at the discretion of the Commissioner of Taxation.
The Government plans to consult with industry stakeholders when the regulations are being drafted and will be open to any other reasonable amendments for other reforms announced in the Budget.
For more information please contact:
John La Rocca
Director – Taxation
P +61 3 9608 0171
E
jlarocca@moorestephens.com.au