SMSF lending money to a related party - why the structure of the related party is crucial | Accurium

For several years, breaching the in-house asset rules and the prohibition on lending to a fund member or a relative of a fund member or providing financial assistance to a fund member or their relative using the financial resources of the fund, have consistently been in the top three audit contraventions. They are also contraventions that carry the most SMSF administrative penalty points, being 60 penalty points.

An aspect of these two rules, that can be commonly misunderstood, is how they interact with each other. Whilst the in-house asset rules effectively provide a 5% allowance for a loan from an SMSF to a related party, where that related party is an individual, for example a sole trader or an individual partner in a partnership, the prohibition on lending to a member or a relative of a member will also have application. The sole purpose test must also be considered.

Click here for the full article. 

The information in this document is provided by Accurium Pty Limited ABN 13 009 492 219 (Accurium). It is factual information only and is not intended to be financial product advice, tax advice or legal advice and should not be relied upon as such. The information is general in nature and may omit detail that could be significant to your particular circumstances.  While all care has been taken to ensure the information is correct at the time of publishing, superannuation and tax legislation can change from time to time and Accurium is not liable for any loss arising from reliance on this information, including reliance on information that is no longer current. Tax is only one consideration when making a financial decision. We recommend that you seek appropriate professional advice before making any financial decisions.