Proposed NCC Budget Changes relaxed
In a previous newsletter we canvassed the problems that the proposed NCC cap changes announced in the budget would create for those seeking to rectify uncommercial, related party, limited recourse loans. Effectively the changes, if implemented, would generally remove the ability to reduce existing loans by forgiving the debt and converting it to a non concessional contribution. Related party loans must be rectified by 31 January 2017 however the legislation, if implemented, is to be backdated to May 2016.
Treasury has now announced that such contributions, made for the purposes of rectification, will be treated under the current rules.
Further, Treasury has advised that transitional arrangements will be put in place in other instances such that;
- if SMSF trustees have signed a contract to purchase an asset prior to 3 May 2016 and
- it will not complete until after that date and
- the member had planned to complete the purchase using NCCs under the current rules then
- they may make those necessary contributions under their current eligibility entitlements