See also
- Residential Property Purchase - with Settlement Statement example which includes the recognition of an LRBA loan and reference to a settlement statement.
- LRBA with multiple loan accounts if the purchase involved more than one loan account.
Overview
A Limited Recourse Borrowing Arrangement refers to when an SMSF trustee takes out a loan from a third party lender to fund a purchase of a single asset to be held in a separate trust. For more information, refer to Limited recourse borrowing arrangements by self-managed super funds on the ATO's website.
List of Funds with LRBA
To obtain a list/report of funds with an LRBA complete the following:
- Navigate to Analytical Insights.
- Select the Transactions tab.
- Select Liability - LRBA.
- View the fund list on the right. The LRBA loan balance can also be viewed in this list.
Note
BGL do not provide accounting or taxation advice. The following is designed to act as a guide for Simple Fund 360 users. It is not designed to be accounting or tax advice and should not be taken as a strict guideline. Other methods that are more suitable may be used instead of these steps.
Recording LRBA in Simple Fund 360
The tabs below will take you through an example of a property purchase under a limited recourse borrowing arrangement. The steps will cover:
- Property setup
- Acquisition costs
- Loan repayments
Add Property
In this example, we will record a purchase of an Australian residential real estate property (account 77200).
| From the Main Toolbar, go to Accounting. |  |
| Select Chart of accounts from the list. |  |
- From the Chart of Accounts, select Add Account and select Investment from the drop-down list.
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Select the Investment Type as Real Estate Properties (Australian - Residential).
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Attach a security. See Securities for steps on how to add a new security.
-
Select More Details >>.
- Set the Tax Label as Assets - Residential Real Property.
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Select the check box Assets subject to Limited Recourse Borrowing Arrangements.
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Select Save.
The checkbox Assets subject to Limited Recourse Borrowing Arrangements will filter the Tax Label section to show labels applicable to LRBA only. It will also add the linked loan account 85500. You can confirm this by selecting More Details >>.
Note: More linked accounts can also be viewed by selecting More Details >>. Also check article Linked Account
Shortcut
Users can also set up a Real Estate property account and link it to LRBA from Property Dashboard as a shortcut.
Acquisition
Record the acquisition transactions for the investment property and loan obtained. Head to the Transaction List. In this example:
- Purchase price of property $400,000 on 05/01/2014
- Value of Loan $200,000
- Cash $200,000
- Refer to the Advanced Training Manual for an example of a purchase involving a 30 day settlement.
| From the Main Toolbar, go to Accounting. | |
| Select Transaction list |  |
- From the Transaction List screen, select New Transaction. From the drop-down list, select Bank Statement.
- Input the date of the transaction and a reference number (Simple Fund 360 will automatically produce a reference number, but it is editable). You can include a description of the transaction in the Description box.
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Under the Account heading, select the bank account from the Input Bank Account box. Next, begin typing and select the rental property account from the Input Account box below (for quick reference you can type the account name). Input 1 unit for the property and the purchase price. The Investment Purchase Details panel will appear below. Confirm the Contract and Settlement date are correct and enter any additional information.
Click the image to expand.
- Select Add Line and input 85500/INVESTCODE in the Select an account box.
- Input the amount of the Loan in the Credit field. Simple Fund 360 will adjust the Bank line to reflect the loan.
Click the image to expand.
- Select Post.
Repayments
Interest repayments can be recorded as interest expenses. When a rental property investment account was created, linked expense accounts were automatically added. Account 42010/INVESTCODE is one of these automatically linked accounts, which can be used to record interest payments.
In this example, the following occurs:
- The interest component is paid from the loan account.
- The interest charged is recorded on a different day to the loan repayment.
Loan Repayment (Bank Statement)
- From the Transaction List, select New Transaction. From the drop-down list, select Bank Statement.
- Input the Date of the repayment and a reference number (Simple Fund 360 will automatically produce a reference number, but it is editable). You can include a description in the Description box.
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Under the Account heading, select the bank account. Next, begin typing and select the loan account 85500/INVESTCODE from the Select an account box below. Input the loan repayment amount in the Debit column.
- Select Post.
Interest Repayment (Journal)
- From the Transaction List screen, select New Transaction. From the drop-down list, select Journal.
- Input the Date of the interest repayment and a reference number (Simple Fund 360 will automatically produce a reference number, but it is editable). You can include a description in the Description box.
- Under the Account heading, select the loan account 85500/INVESTCODE and input the repayment amount in the Credit column. Next, begin typing and select account 42010/INVESTCODE to record the interest expense in the Debit column.
- Select Post.