In a statement, BT’s technical consultant Tim Howard said the changes impacting SMSF clients with an LRBA have raised the most questions from advisers for this quarter, according to BT Advice Technical’s round-up of adviser queries.
The changes can be explained in two parts, Mr Howard said.
“The first part relates to combining the outstanding LRBA debt to calculate a client’s total super balance,” he said.
It’s important to note that this measure is proposed at this stage only, Mr Howard said.
The second part relates to the interaction between LRBAs and the transfer balance cap, he said
Under this measure, SMSF clients will be required to record a credit against their transfer balance account where an LRBA held in retirement phase is repaid from funds held in accumulation phase.
Mr Howard said this measure has broadly been introduced to prevent people transferring funds from accumulation to retirement phase via a loan repayment, in an attempt to circumvent the transfer balance cap.
“This measure will likely only affect a minority of clients and it’s important to note that existing LRBAs in place prior to 1 July 2017 will not be impacted,” Mr Howard said.
“Due to the level of complexity in these measures, it’s timely to seek expert counsel so clients are aware of the changes. However, for now no immediate change is required to client strategies and it’s business as usual, while we await any further consultation.”
