An early Christmas present from the ATO

28.09.2011

The ATO has very recently released draft ruling SMSFR 2011/D1. This ruling covers a whole lot of topics; all relating to how they intend to deal with SMSF’s, that are using a Limited Recourse Borrowing Arrangement (LRBA).

In case you’ve not caught up with the news, SMSF’s have been able to borrow to buy property, using a borrowing arrangement known as a LRBA. If you are not aware then you are possibly missing out on a significant strategy. As always I caution, you              should make sure you receive proper specialist advice, before you venture down this track. However, for those whose circumstances warrant the use of such a strategy, then it can be a great way to provide a boost to your retirement plans.

One of the problem areas with adopting this strategy has been the very strict rules with regard to improving the property that       has been purchased using a LRBA, or even replacing a property that has been damaged as a result of something like a fire,        flood or cyclone.

Now we come to the ‘early Christmas present’; in SMSFR 2011/D1, the ATO have set out a much more sensible approach to                                                             these issues. But wait there’s more, they have even given us some examples, so that all we have to do is follow their                                                                                   examples and we know we can’t get ourselves in to trouble with them.

This draft ruling is of real benefit to those of you that have already set up a LRBA, or those who have who would like to. This ruling                                                         will be great for people who want to buy a cheap property and then improve it.

If you want to read the ruling, then here is the link http://law.ato.gov.au/atolaw/view.htm?DocID=DSF/SMSFR2011D1/NAT/ATO/00001

Finally, let me remind you, this article is for general information only and you should always seek specialist advice, before using                                                          a Limited Recourse Borrowing Arrangement.