| Superannuation Funds - Managing investments 2 |
| LOANS/FINANCIAL ASSISTANCE TO MEMBERS OR A MEMBERS'S RELATIVE. |
LOANS/FINANCIAL ASSISTANCE TO MEMBERS OR A MEMBERS'S RELATIVE:
Trustees are prohibited from lending money or providing financial assistance from the fund to a member or a member's relative. The use of a fund asset by a member or a member's relative for no cost or as a guarantee to secure a personal loan for example would be in breach of this investment restriction.
BORROWINGS:
SMSFs are prohibited from borrowing money except in some limited circumstances. Trustees are able to borrow for a maximum of 90 days to meet benefit payments due to members or to meet a surcharge liability as long as the borrowing does not exceed 10% of the fund's total assets. Trustees can also borrow for a maximum of 7 days to cover the settlement of security transactions if the borrowing does not exceed 10% of the fund's total assets. However, trustees cannot, as a matter of course borrow to settle security transactions, unless at the time the transaction was entered into it was likely that the borrowing would not be needed.
ACQUISITION OF ASSETS FROM A 'RELATED PARTY':
Trustees are prohibited from acquiring assets for the superannuation fund from a 'related party' of the fund. Limited exceptions to this rule exist, if:
the asset is an in-house asset and would not result in the level of in-house assets of the fund exceeding 5% of the fund's assets, or is an asset specifically excluded from being an in-house asset;
the asset is a listed security (e.g. shares, units or bonds listed on an approved Stock Exchange);
the asset is 'business real property'.
RELATED PARTY OF A FUND:
A 'related party' of a fund covers all members of the fund and their associates and all employer sponsors of the fund and their associates. Associates of members would include their relatives, business partners and any companies or trusts that they control (either alone or with their other associates).
Associates of employers would include business partners and any companies or trusts that the employer controls (either alone or with their other associates) or companies and trusts which control the employer.
IN-HOUSE ASSETS:
An 'in-house asset' is a loan to, an investment in, and leases with, a related party of the fund. In general SMSFs are restricted from lending, investing or leasing more than 5% of the fund's total assets in a related party of the fund. Some exceptions do exist, including allowing an exemption for 'business real property' which is subject to a lease between the fund and a related party of the fund and a limited exemption for certain investments in related non-geared trusts or companies.
Taken from an ATO publication titled 'A DO IT YOURSELF GUIDE FOR TRUSTEES RUNNING A SELF MANAGED SUPERANNUATION FUND'
15th-May-2001 |
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