You should therefore consider your fund`s investment strategy and determine whether the investment is appropriate and that all acceptable credits are granted on commercial terms. Unfortunately, the practice of some people withdrawing funds from their WSSIs to „temporarily“ help keep their business afloat when cash flows are scarce is all too common. This is the most common offence, accounting for more than 25% of the offences reported by the auditors at the ATO each year, and is illegal. In addition to the 5% limit for a loan from an WSIS to a nearby party, another important aspect must be respected to ensure that the loan is an extension of arms, i.e. the same interest rates, repayments and guarantees as an independent loan. It is the agent`s responsibility to be able to prove to the Independent Auditor of the Fund and (potentially) to the ATO, as a regulator, that the loan is granted on commercial terms. However, it would be a mutual agreement, as you are proposing. What law says it`s against super-rules? Typically, if a WSSA has an LRBA, the SMSF will make a loan directly from the lender. However, in very specific circumstances, an SMSF may maintain the borrowing of another party, for example. B the holding company, if the SMSF assumes all the borrowing obligations. Make sure you create a credit repayment plan and a simple trust.
One of the investment restrictions that directors must comply with under section 65 of the SIS Act is that they cannot lend money or provide other financial assistance by using the Fund`s resources to (i) support a member of the Fund; or (ii) a relative of a member of the Fund. Section 65 of the SIS Act prohibits superannuation funds, including WSIs, members or their loved ones from providing financial assistance. Under the super-law applicable to these agreements, the lender`s or another person`s action against the trustees of SMSF in connection with or as a result of a late payment of the loan must be limited (directly or indirectly) to the rights related to the assets acquired under the agreement. In the case of agreements reached on or after July 7, 2010, no reduction is allowed for capital improvement. The super-law applicable to these regimes expressly prohibits borrowing in order to make improvements in accordance with paragraph 67A, paragraph 1, point a) (i) of the SISA. In movies, IOUs are often handwritten on a sheet of paper. Sometimes someone makes a „minute“ instead of a credit contract. Both approaches fail. In Rowntree v. FCT [2018], FCA 182 demonstrates the extra care required to document simple transactions with related persons, such as loans. In that case, the taxpayer, a practical lawyer with NSW, claimed that he had borrowed more than $4 million from his group of private companies. The Court said: It is interesting to note that, based on our research and interpretation of the „total wealth“ of a WSIS, there is no loan under a limited repayment agreement (LRBA), so that a WSIS with $1 million of commercial property with a $600,000 loan would have a balance sheet total of $1 million.
, not $400,000 in net dollars.