The ATO has issued a guide for trustees of SMSFs on its website which asks the question:

“Has someone asked you to invest your SMSF funds into a trust, company or investment product, and then offered to lend some or all of that money back to you, your company or any entity you control?”

If the answer is yes, it is likely that the arrangement contravenes superannuation laws.

The ATO understands that some individuals and organisations promote arrangements where SMSF funds are deposited into unit trusts, or pooled investment trusts of which have a management fee attached.

This money is then used to obtain a personal or business related mortgage which results in the SMSF assets being used to provide members with benefits in the present. This means that the primary purpose of such arrangements is to enable individuals and any associates to use their superannuation savings to provide assistance to members or relatives.

As a result of this, the ATO is currently closely scrutinising certain lending arrangements such as the one described above. A reminder has been sent to trustees that these arrangements would breach the sole purpose test, as the SMSF is being used for a purpose other than providing retirement benefits for members.

Ref: ATO website – Loan arrangements that contravene super laws

This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.