Best to start LRBA in SMSF before July

Michael Hallinan

Michael Hallinan

The proposal to include LRBA debt in total super balance is an incentive to start an LRBA before 1 July 2018 as existing LRBAs will be grandfathered.

The proposal that the unpaid debt of an LRBA be included in the total super balance of the participating members is a good incentive to have LRBAs in place before 1 July 2018.

The proposal will not apply to existing LRBAs which are in place before 1 July 2018 – these LRBAs are grandfathered.  Also, the proposal will not apply to LRBAs which in place before 1 July 2018 and which are refinanced on or after 1 July 2018.

It may be better to interpose a unit trust between the SMSF and the real estate proposed to be acquired – as the underlying property can be sold with the cash retained in the unit trust and used to buy another property.

In this situation, as the acquired property are the units in the interposed unit trust, the real estate held by the unit trust can be sold and other real estate purchased without disturbing the “acquired property” and therefore the LRBA continues notwithstanding the change in the underlying property and the LRBA retains its pre 1 July 2018 status.

Michael Hallinan, Special Counsel Superannuation

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