The safe harbour provision interest rate to be charged to SMSFs with related party loans has increased by a whopping 3.5% for the 2023/2024 financial year. It’s now 8.85% for real estate and 10.85% for listed securities. This may encourage trustees to sell the investment or seek refinancing from an arm’s lender at a lower rate – but first check the loan documentation.

Under the safe harbour provisions the interest rate may have been fixed for 5 years so it’s possible that the rate will not need adjusting for the moment.

It’s always worth mentioning, in any consideration of related party loans, that a member’s prorata share of the outstanding loan is counted as an asset for total super balance purposes under an obscure and unnecessary rule that was instigated to fix a problem that did not exist – but I won’t expand on that here. Needless to say, this may have the effect of preventing a member form making a non-concessional contribution to pay out the loan – a classic circular argument – unless it’s refinanced through an arm’s length lender first. It should also be noted that this may not be a solution as even non-related loans are counted once the member’s benefit becomes unrestricted non-preserved.

As always, I am available to discuss strategies with our Alliance Partners.