The government has released an exposure draft of legislation that alters how having a superannuation borrowing arrangement (LRBA) in an SMSF will affect transfer balance account credits and the calculation of total superannuation balances in SMSFs (Treasury Laws Amendment (2017 Measures No. 2) Bill 2017: limited recourse borrowing arrangements).


The proposed measures have a number of potential consequences. If an SMSF has an LRBA, then under the new rules (if passed) a member could find they now have:

  • an excess transfer balance; and
  • a zero non-concessional cap,

in circumstances where that was not the case without these rules.

Total superannuation balance

Under the proposals, a share of the outstanding amount of a borrowing under an LRBA will be added to members’ ‘total superannuation balance’, increasing it beyond the ordinary calculations.

This will apply where:

  • there is an amount outstanding under an LRBA that complies with section 67A; and
  • the assets secured by that debt support the member’s superannuation interest.

The result is that part of the outstanding debt under an LRBA is included as an additional amount when calculating members’ ‘total superannuation balance’.

The amount for each member is that proportion of the outstanding debt that member’s superannuation interest supported by the secured assets bears to all members’ superannuation interests supported by the secured assets.

Transfer balance credits

The exposure draft also provides for a new transfer balance account credit where an amount is paid to reduce an outstanding borrowing under an LRBA, and it results in an increase in the value of the superannuation pension interest.

This is designed to provide a transfer balance account credit where an asset the subject of an LRBA supports a pension, and funds are used from the accumulation phase (for example a contribution) to reduce the debt. This has the effective of moving funds from accumulation phase into pension phase, and will now give rise to a transfer balance account credit.

Both measures apply to SMSFs and funds with less than five members.

It is proposed these measures start from 1 January, 1 April, 1 July or 1 October after the day the Act receives royal assent. This means it may not apply until some time after 1 July 2017.