ATO scrutinising all unit trust investments

09-Nov-2017

By Darin Tyson-Chan

Related Articles: | |

The ATO is in the process of examining all SMSF investments in unit trusts as part of its compliance activities regarding related-party transactions, a technical expert has revealed.

“The related-party transactions are very much on the ATO’s hot list due to the nature of self-managed super funds and the inter-relations of their members and trustees,” NowInfinity SMSF technical director Julie Dolan told delegates at the Chartered Accountants Australia and New Zealand National SMSF Conference 2017 held in Sydney recently.

“Via the audit contravention report they will continue to look at breaches in this area.

“And I’m just seeing, recently even more so, not only are the standard related-party transactions [being scrutinised] but the more complex arrangements [as well].

“[The ATO is looking at] the fact that an SMSF had invested in a unit trust [even where] that unit trust was okay in the sense of related-party rules.”

According to Dolan, the ATO’s attitude means practitioners and their clients need to be aware of the regulations surrounding investing in unit trusts, but one compliance area in particular.

“The big one is in-house assets and that’s defined in section 71 of SISA (Superannuation Industry (Supervision) Act),” she warned.

Situations governed by this section include an investment in a related party of the fund, an investment in a related-party trust, or an asset of the fund that is leased to a related party, Dolan said.

She added breaching these rules could end up being a very costly exercise for adviser’s clients.

“[A breach] carries an administrative penalty of 60 units, multiplied by $210 per unit, and as you know if it’s a corporate trustee the penalty is for the corporate trustee, but if you have individual trustees it’s per individual trustee and comes out of their back pocket,” she noted.

« Back to Articles