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Budget LRBA Changes


In this year’s budget, the Treasurer announced two changes to the taxation treatment of Limited Recourse Borrowing arrangements (LRBAs).  These changes were intended to improve the integrity of LRBAs.  The first and more significant change was the inclusion of the outstanding loan balance in the total superannuation balance of the relevant member.  The second and far less significant change was to LRBAs in retirement phase, so that any repayment of the LRBA debt from an accumulation interest was to be treated as a credit to the transfer balance cap.

The first change was not included in the most recent taxation amendment bill.  However, the second change has been included.

It seems that the Government has not decided to proceed with the first change but simply recognised that the change needs more thought and discussion and so will be introduced later.

The second change is now with us as the relevant amendment was enacted as part of Treasury Laws Amendment (2017 Measures No 2) Act 2017.  The amendment Act introduced a new entry into the table at s294-25(1) being Items 4 and 5 of that table.

The new change operates in the following manner.  Consider Bert who is the sole member of the Bert SMSF and who has a pension account and also an accumulation account.  Bert’s pension account is represented solely by an asset acquired under a LRBA.  This asset has a market value of $500,000 but the debt on the asset is $300,000.   When Bert commenced his pension, the net pension account balance was $200,000 (gross $500,000 with a debt of $300,000).  Consequently Bert will have a transfer balance account with a $200,000 credit (as the pension commenced on 1 July 2018).

If the LRBA debt was reduced by $15,000 of contributions made by Bert then, effectively, his pension interest will increase by the amount of the debt which has been repaid.  In this situation, the recent change will treat the $15,000 repayment as a further credit to Bert’s transfer balance account.  

Consequently, Bert’s transfer balance entries will be as follows

Transfer balance Account:


Transfer Balance Debit

Transfer Balance Credit

Transfer Balance

Commence Pension 1 July 2018







Payment of LRBA debt by contributions