Note that this Draft Legislation and has not been approved.
The Government has released for public consultation draft legislation and associated explanatory materials for changes to improve the integrity of the superannuation system. These changes are being progressed as part of a package of amendments to address concerns that have been raised in the implementation of the superannuation reform tax package. Closing date for submissions is
The draft legislation will include the use of limited recourse borrowing arrangements (LRBA) in a member’s total superannuation balance and transfer balance cap to the transfer balance cap and total superannuation balance. The amendments will address concerns about the ability of SMSF members to use LRBAs to circumvent contribution caps and effectively transfer accumulation growth to retirement phase that is not captured by the transfer balance cap.
Proposed New law
The transfer balance cap rules are proposed to be amended to create an additional transfer balance credit. This credit will arise where the repayment of an LRBA shifts value between accumulation phase interests and retirement phase interests in a superannuation fund that is a self-managed superannuation fund (SMSF) or a complying superannuation fund with less than 5 members.
The amount of the credit that an individual member receives is equal to the increase in the value of their retirement phase superannuation interests.
The transfer balance in an individual’s transfer balance account changes according to the transfer balance credit and transfer balance debit entries made to the account. A credit reduces the amount of available cap space that an individual has, whereas as a debit increases the amount available.
LRBAs currently do not affect the transfer balance cap.
|Proposed amendments to the total superannuation balance so that it takes into account the outstanding balance of an LRBA that is entered into by the trustee of a regulated superannuation fund that is an SMSF or that has less than 5 members. As a result of these changes, an individual member’s total superannuation balance is increased by the share of the outstanding balance of an LRBA related to the assets that support their superannuation interests
To determine an individual’s total superannuation balance, the following amounts are added together:
Changes to Simple Fund 360
Currently no changes are planned for Simple Fund 360 until Legislation has been passed.