ATO's Safe Harbour Interest Rate 23/24

ATO interest rate for 2023-24 for SMSF related party LRBAs

The ATO's safe harbour interest rate is 8.85% for the 2023-24 financial year for SMSF related party limited recourse borrowing arrangements ('LRBAs') used to acquire real property (up from 5.35% for 2022-23).

Practical Compliance Guideline PCG 2016/5 provides that the safe harbour interest rate for a particular year is determined by looking at the "Reserve Bank Indicator Lending Rates for banks providing standard variable housing loans for investors" published for the month of May immediately prior to the start of the relevant financial year.

The relevant Reserve Bank Indicator Lending Rate for May 2023 is 8.85%, and so the ATO's safe harbour interest rate for the 2023-24 financial year is 8.85% (it is 10.85% for listed securities).

The non-arm's length income rules will not apply to the income generated from the LRBA asset, provided that the LRBA is structured in accordance with the safe harbour rules set out in PCG 2016/5.

However, if an LRBA does not meet those safe harbour rules, the SMSF will need to otherwise demonstrate to the ATO that its arrangement is consistent with an arm's length dealing.

For more information, visit the Australian Taxation Office website.

Ref: ATO Community, LRBA safe harbour interest rate for 23/24, 14 June 2023


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