The move has been well received across the SMSF sector, with the SMSF Association’s chief executive, Andrea Slattery, saying the original deadline was tight for those looking to take remedial action.

“This extension of time shows that the ATO is listening to the SMSF sector’s concerns,” she said.

However, DBA Lawyers director Daniel Butler flagged a number of issues that professionals should be aware of as they restructure their clients’ loan arrangements.

The practical compliance guideline (PCG), which sets out the 'safe harbour' terms on which SMSF trustees may structure their LRBA consistent with an arm’s length dealing, appears to apply to all real property.

However, Mr Butler queries whether the guideline applies to interests via shares in a body corporate that provide the shareholder exclusive ownership of a particular unit or apartment; to a tenants in common interest; or to a leasehold interest.

“The ATO confirms in the PCG that it applies to residential, commercial and primary production but do not expressly address these other interests,” he said.

Further, while the guidelines are clear on actual interest rates, Mr Butler said they do not provide any guidance on the interest criteria, such as whether the rate is to be applied as a nominal annual interest rate or whether it is to be compounded, say monthly, so as to give rise to a higher effective interest rate.

“We suspect many in practice are applying a nominal rate as this also applies for private company loans under division 7A of the Income Tax Assessment Act 1936,” he said.

Mr Butler also believes the PCG is “uncertain” about whether a refinancing can be with a related party.

“While there does not appear to be any express prohibition to refinance with a related party lender, confirmation from the ATO on this point would be welcome,” Mr Butler said.

With respect to multiple lenders, PCG 2016/5 confirms that two loans can be used to buy one asset under the same LRBA.

Mr Butler noted that if doing so for real property, “presumably” each loan must have a registered mortgage. However, the guidelines do not expressly comment apart from saying that a registered mortgage must exist.

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