The ATO has issued its Practical Compliance Guidelines as to what constitutes a “safe harbour” for related party LRBAs. The Guidelines provided guidance only in relation to real property LRBAs and listed shares/securities LRBAs.

No guidance (practical or otherwise) has been provided for private unit trust LRBAs.  Further, the guidance provided is not as comfortable or as accommodating as one would have hoped from a safe harbour.  In particular the maximum LVRs, maximum duration and minimum interest rates are not comfortable.

However, three important points should be made:

1. The release of the Guidelines together with the revised IDs 2015/27 and 28 essentially means that the policy arguments for banning LRBAs are now removed
2. An arrangement outside the parameters of the Guidelines is not automatically “beyond the Pale” as benchmarking remains an option
3. Finally, the practical assistance provided by the Guidelines can only be assessed by living with and experiencing the joy of restructuring of an LRBA to be within the harbour.

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