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Jason G

May 09, 2024

LRBA - Single Asset - Multiple Titles?

in SMSF Technical Forum

There is a situation where an SMSF might acquire a group of townhouses on one block. They want to buy the entire block.

The issue is that there are two lots on this deposit plan; Lot 1 is the land and property; lot 2 is the driveway.

So on the sale contract (NSW), there are two title references, e.g. 1/12345 and 2/12345.

The two lots are rated together, jointly rated for council rates etc.

I note ATO ruling https://www.ato.gov.au/law/view/print?DocID=SFR/SMSFR20121/NAT/ATO/00001 indicates if the two titles cannot be treated separately then it is a single acquirable asset.

Is this a single asset for LRBA borrowing purposes?

Thank you.

1 comment

Comments (1)

THE AUDITORS INSTITUTE

May 13, 2024

Hi Jason

If you refer example 4 in SMSF Ruling 2012/1 "Self Managed Superannuation Funds: limited recourse borrowing arrangements - application of key concepts" it states:

"Example 4 - apartment with separate car park

58. The trustee of an SMSF wants to enter into an LRBA to purchase an apartment with a separate car park on the same strata plan that contains a notice of restriction. The apartment and car park are each on a separate legal title. As the strata plan contains a notice of restriction, if the car park and apartment are not transferred together the transfer of title of the apartment cannot be registered according to the relevant law of the State.[33]

59. As the two titles must both be transferred if the transfer of title of the apartment is to be registered, this effectively means that the two assets must be dealt with together under a law of the State. In these circumstances the apartment and car park comprise a single acquirable asset that may be acquired under a single LRBA."

In your example I assume it is the same as example 4 from the ruling in that the 2 titles cannot be dealt with separately. If that is the case the townhouse (or townhouses) and the driveway are a single object of property and is a single acquirable asset that can be acquired under a single LRBA.

Given the issues involved (and there are multiple townhouses) my view is that legal advice should be obtained to confirm that it is a single acquirable asset that can be acquired under a single LRBA.

Thanks

The Auditors Institute