SMSF borrowing and non-commercial terms — new ATO decisions released
The ATO recently published 2 new interpretative decisions concerning related party limited recourse borrowing arrangements and non-arm's length income.
One feature common to the decisions was the 0% interest rate applying under the relevant loan arrangements. In these circumstances, the ATO determined that all income derived by the SMSF was to be assessed as non-arm's length income, currently subject to a 47% tax rate.
This article briefly summarises the ATO's decisions and explains the practical considerations for members and trustees of SMSFs.