Powered by MOMENTUM MEDIA
moneymanagement logo
 
 

SMSF trustees should ensure loans are 'real': Townsend

smsf-trustees/SMSF/compliance/trustee/

17 August 2012
| By Staff |
image
image image
expand image

Related parties that loan to SMSF trustees need to ensure that the loan is a real loan and not a 'financial accommodation'.

Townsend Business and Corporate Lawyers said SMSF trustees should not ignore the rules on SMSF borrowing from related parties by considering loans as paper transactions.

Peter Townsend, the firm's principal, said the loan not only has to adhere to the SIS Act, but also has to avoid appearing as a 'financial accommodation'.

"It has to be a properly documented loan and actual funds have to be paid over by the lender," he said.

Townsend said the money had to be transferred out of the loaner's account and presented at settlement on behalf of the trustee before being received by the Vendor for the amount being paid on the property. 

"Journal entries or set-offs do not meet the requirements of a loan or borrowing," he said.

The consequences on the limited recourse borrowing arrangement if the related party loan is found to be a financial accommodation rather than a loan (borrowing) is that the holding trust may fall outside the exception provided by s71(8) which excludes the holding trust from being considered an in house asset. The whole transaction could be non-compliant, Townsend said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Significant ethical issues there. If a relationship is in the process of breaking down then both parties are likely to b...

4 days 22 hours ago

It's not licensees not putting them on, it's small businesses (that are licensed) that cannot afford to put them on. The...

1 week 4 days ago

So we are now underwriting criminal scams?...

6 months 2 weeks ago

After last month’s surprise hold, the Reserve Bank of Australia has announced its latest interest rate decision....

6 days 18 hours ago

Libby Roy has been appointed as an independent non-executive director on the board of AZ NGA....

3 weeks 6 days ago

A professional year supervisor has been banned for five years after advice provided by his provisional relevant provider was deemed to be inappropriate, the first time th...

2 weeks 5 days ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
74.26 3 y p.a(%)
3