SUPERCentral is an independent online platform provider of SMSFs, advice, legal documentation and wealth management services to accounting and financial planning firms throughout Australia.
Is it time to unwind your SMSF Limited Recourse Borrowing Arrangement?
Since its introduction, Limited Recourse Borrowing Arrangement has served many Australians to buy real property in their self managed superannuation fund. Recently, we have seen an increase in the number of SMSFs that have repaid the loans and are unwinding the arrangements.
How does unwinding work?
Unwinding a Limited Recourse Borrowing Arrangement involves transferring the property under the arrangement from the holding trustee (otherwise referred to as bare trustee or custodian) to the fund trustee, after the loan has been repaid in full.
The benefits of unwinding
While an SMSF may comply with the superannuation laws without unwinding an LRBA there are obvious benefits to still do so. Transferring the property to the fund trustee would mean there is:
- Much more flexibility with changing or improving the property
- Less ongoing administration and professional fees associated with maintaining a corporate holding trustee
- The ‘look through’ tax treatment means no adverse CGT consequences in transferring the property to the fund trustee, as the current taxation laws treats these arrangements as if the holding trust did not exist (i.e. the assets held by the holding trustee are deemed to be held by the fund trustee).
Tax concessions may be available
Unwinding transaction will incur costs to the fund, including legal and other professional fees, plus relevant government charges associated with transfer of a land. If it can be supported with evidence that the transaction was correctly structured and implemented, the fund will be eligible for a concession or exemption on the stamp duty payable on the transfer (depending on the location of the property). Collating the required evidence for the concession and exemption may prove to be difficult over time, so we recommend fund trustees arrange an unwinding process as soon as possible, once the loan has been repaid.
Interested in unwinding?
Get in touch with us and we can help you unwind a Limited Recourse Borrowing Arrangement and assist with the transfer of the property. Simply call the SUPERCentral Help Desk on 02 8296 6266 or email firstname.lastname@example.org.