SMSF trustees making purchases of business real property from a related party for inclusion in their fund need to ensure the transaction is not a proxy for a loan to a member to avoid breaching trustee obligations, a technical expert has warned.
Colonial First State head of technical services Craig Day said SMSF trustees could make certain purchases from a related party, but any transaction had to be carried out at market value and without any obligations attached.
“There is a need to watch out for financial assistance because a fund is prohibited from lending money or providing any form of financial assistance to a member or a relative of a member,” Day said during a session on the use of lumpy assets in an SMSF at the recent Tax Institute National Superannuation Online Conference.
“Financial assistance includes a wide range of circumstances and can include any security, obligation or lien over fund assets that provides financial assistance to a member where it relies upon assets of the fund.”
He said it did not matter if the assets of the SMSF were impacted or not, but rather as soon as a member, or a relative of a member, relies on the assets to get financial assistance it was a breach of section 65 of the Superannuation Industry (Supervision) Act.
Any form of financing arrangements would also create a breach as an SMSF member cannot provide any sort of assistance that would constitute or look like the provision of finance to a member or a relative of a member, he said.
“An example that has been given of this is where a member owns commercial property and sells it into their SMSF, and uses the capital released to invest into their business and then later arranges to buy the business real property back off the fund in the way that would constitute the repayment of a loan,” he said.
“Most people would never do this because of the transaction costs involved, but if someone is desperate for investment, but can’t get a bank loan, then you do see these types of arrangements, and it is financial assistance and it breaches section 65.”
October 26, 2020
BEc (Acc), MBA, CPA, FFin
David has been in the Financial Services Industry for nearly 30 years. He was one of the founding Directors of the successful Financial Planning and Stockbroking Practice, Henderson Gregory Forrest, for a decade. Prior to that, he held senior roles in companies such as ING, KPMG Accountants and AMP. David was previously Chairman of OAMPS Superannuation Trustee Board and currently serves as an independent Board Director for several companies.
David’s extensive experience in all forms of superannuation, including Self Managed Super Funds (SMSF), Defined Benefit Funds, retirement funding through Account Based Pensions, stockbroking with a focus on Direct Share Investment, Taxation/Remuneration Planning, Centrelink, Aged Care and business management, equip him to advise expertly on all aspects of Financial Advice.
Those with a particular interest in superannuation/SMSFs, direct share investment, salary packaging or applying for the Centrelink Pension will find his knowledge and ability in formulating and implementing creative, logical and simple wealth creation strategies a valuable asset.
David maintains a strong personalised client service focus, providing tailored solutions for clients.
David Forrest is an Authorised Representative of Integrity Financial (SA) Pty Ltd ABN 16 133 921 187 — AFSL No 334846
Business Finance Manager
B Bus (Acc), CPA
Michelle’s career has spanned across the Financial Services, Retirement Living and Aged Care industries working in the private sector, not for profit and more recently with the state government for over 20 years. Her experience extends to many facets of the financial services industry, having worked in superannuation administration, technical support and financial planning practice administration.
Commencing with AMP and subsequently working in commerce and accounting roles with companies such as Brambles, Adelaide Bank Retirement Services, ECH Inc and SA Health and Wellbeing, Michelle returns to financial services after working in practice financial management at Henderson Gregory Forrest. This wide range of experience from senior accounting and management roles has provided Michelle with a strong background in business administration.
With an astute financial acumen and keen interest in business improvement strategies, Michelle ensures the smooth running of the Integrity Financial Advisory practice providing valued management support to our personalised client service focus.
Client Service Manager
Jasmine has worked in the financial services industry for over 12 years in all areas of client administration, working with David since 2013.
Jasmine has extensive knowledge and experience in client service including implementation of advice, portfolio reporting, assisting with the establishment of Self Managed Super Funds (SMSFs), term deposit management and a long history of helping clients with their enquiries.
Jasmine’s attention to detail, yet gentle approach, means she is able to solve the trickiest of questions for our client community.
Jasmine has gained her Certificate III in Financial Services qualification.
Client Service Manager
Merrilyn has worked in the financial services industry for over 11 years in all areas of client administration, and is a new addition to our client services team, returning from Melbourne to join the team in June 2019.
Merrilyn has extensive knowledge and experience in client service including implementation of advice, managed fund administration, assisting with the establishment of Self Managed Super Funds (SMSFs) and process improvement for the previous practices she has worked with. Merrilyn’s experience with direct shares constitutes the other part of our administrative support for direct equity investments.
Merrilyn’s warm and caring nature continues to endear her to our clients and she has already established herself as a valued member of our team.