In this guide
If you are an SMSF trustee who has borrowed money through your fund to acquire an asset, then you may be wondering what happens when that loan is paid off. And you are not alone.
Over 10% of all SMSFs have used a limited recourse borrowing arrangement (LRBA) at some stage, and many of these loans are now coming to an end.
Background to LRBAs
The limited recourse borrowing rules allow an SMSF to borrow money to purchase a ‘single acquirable asset’ that is held on trust for the SMSF.
The trustee of the holding trust is the legal owner of the asset and the SMSF trustee is the beneficial owner.
Once the loan has been repaid in full, the SMSF trustees have a right to acquire the legal ownership of the asset.
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