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Forward Thinking Magazine : August 2011
33 Summary The LRBA borrowing market appears to be continuing to grow, partially fuelled by client demand. The current SIS provisions cause a number of issues for SMSFs looking to hold real property via an LRBA. Some of these issues may be addressed by using an interposed entity, but that solution in itself can add further complexity to an already complex arrangement. When structuring an LRBA, consider the issues associated with unwinding the arrangement, and potential insurance to cover early death or disablement. Proposed licensing and tax law We reported in the August 2010 article that the Government intended to amend the Corporations Regulations to tighten the licensing requirements around those providing services and giving advice in the LRBA field. Similarly, the Government has proposed to amend the taxation law to remove anomalies in the taxation of instalment warrant arrangements, including superannuation LRBAs. To date these measures have not been legislated. Figure 3: Holding Trust MARY FRANK LRBA asset $1m LENDER $500K death benefit $500K loan repayment $500K debt Charge Beneficial Interest $500K life insurance cover on Frank's life SMSF MAStech