The ATO said it continues to receive private binding ruling requests about whether related party limited recourse borrowing arrangements (LRBAs) give rise to non-arm’s length income (NALI).
Following industry consultation, on 12 December 2014, the ATO issued ATO ID 2014/39 and ATO ID 2014/40. The IDs set out the ATO’s view that the NALI provisions apply to the non-commercial LRBAs involving related parties in those cases. However, the ATO said the IDs should not be seen as concluding that all related-party LRBAs give rise to NALI.
The ATO said it will apply scrutiny to related-party LRBAs where the terms of the loan, taken together, and the ongoing operation of the loan, are not consistent with what an arm’s length lender dealing at arm’s length would accept in relation to the particular borrowing by the fund trustee.
[LTN 244, 17/12/14]