The Importance of SMSF documentation

In Taxpayer Alert 2012/7 the Australian Taxation Office warns Self Managed Superannuation Fund (SMSF) trustees and adviser to exercise due diligience and care.  If a poorly executed investment leads to contraventions of the SIS Act the trustee may face disqualification, prosecution and penalties notwithstanding the trustee’s (mum and dad’s) lack of involvement in the transaction. Further, the SMSF may be made non-complying, which means that the income and the market value of the assets will be subject to 45% tax.


Specifically, Taxpayer Alert 2012/7 with regard to borrowing within a SMSF via a limited recourse borrowing arrangement (LRBA) highlighted the following breaches;


a.    The borrowing and the title of the property is held in the individual’s name;


b.   The title of the property is held by the SMSF trustee not the trustee of the holding trust;


c.   The trustee of the holding trust is not in existence and the holding trust is not established at the time the contract to acquire the asset is signed;


d.   The SMSF trustee acquires a residential property from the SMSF member;


e.  The acquisition comprises two or more separate titles and there is no physical or legal impediment to the two titles being dealt with, assigned or transferred separately;  or


f.   The asset is a vacant block of land. The SMSF intends to use the same borrowing to construct a house on the land. The land is transferred to the holding trust prior to the house being built.


It is strongly recommended, given the above, that specialist advice is sought prior to entering into superannuation investment strategies.


Quinn Financial Planning has the expertise to help you build your wealth. For more advice on investing in a Self Managed Super Fund, please contact Peter Quinn here at Quinns by submitting an

online enquiry or calling us on 9580 9166 to book an obligation free appointment. 


The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.  It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.