LRBA changes top on adviser minds
Changes to limited recourse borrowing arrangements (LRBAs) have topped adviser queries, according to BT Advice Technical’s June quarter round-up.
BT’s technical consultant, Tim Howard, said the changes affecting self-managed superannuation fund (SMSF) clients could be explained in two parts.
“The first part relates to combining the outstanding LRBA debt to calculate a client’s total super balance,” Howard said, adding this measure was only proposed at this stage.
The second part related to the interaction between LRBAs and the transfer balance cap. Under this measure, SMSF clients would be required to record a credit against their transfer balance account where an LRBA held in retirement phase was repaid from funds held in accumulation phase.
Howard said the purpose of this measure was to prevent people transferring funds from accumulation to retirement phase via a loan repayment, in an attempt to avoid the transfer balance cap.
“This measure will likely only affect a minority of clients and it’s important to note that existing LRBAs in place prior to 1 July 2017 will not be impacted,” Howard said.
“Due to the level of complexity in these measures, it’s timely to seek expert counsel so clients are aware of the changes.
“However, for now no immediate change is required to client strategies and it’s business as usual, while we await any further consultation.”
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