Loans and In-house Asset Rules

In a recent decision, the AAT upheld a non-compliance notice issued to a self-managed superannuation fund (SMSF) for breaching the in-house asset rules.

The SMSF made loans to a company, which was a related party of the fund. The total of the loans exceeded the in-house asset rules limit of 5%.

The Tribunal noted that the loans remained outstanding for more four years after the breach. In addition, it considered the trustees’ offer of enforceable undertakings came too late in the day.

A regulated superannuation fund is, generally, restricted from having more than 5% of the total market value of its assets at the end of an income year invested in in-house assets. An in-house asset includes a loan to a related party of the fund.

  • A non-complying SMSF is subject to a tax rate of 45% rather than the 15% concessional tax rate available to a complying fund.
  • An SMSF cannot extend a loan to a member (or a member’s relative), even where the in-house asset rules are not breached.

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