The ATO has released a draft legislative instrument regarding trusts formed to hold property for limited recourse borrowing arrangements.

The legislative instrument will potentially exclude an investment in a related trust held by an SMSF as a required part of an Limited Recourse Borrowing Arrangement from being an in-house asset of the SMSF.

If formalised, the instrument will apply retrospectively, from 24 September 2007 – the date from which SMSF Limited Recourse Borrowing Arrangements were permitted.