Self-Managed Superannuation Funds – Compliance.
The Australian Taxation Office (“ATO”) has extremely strict rules for self-managed superannuation funds (“SMSFs”).
If the trustees of a SMSF do not comply with the strict rules then the highest rate of tax will be payable.
Some of the rules that govern SMSFs include:
- Arm’s length transactions – all transactions need to be at arm’s length. There are some exemptions (such as the transfer of business property into the SMSF for full market value).
- Your SMSF must meet the “sole purpose test” which means that the SMSF needs to be maintained for the sole purpose of providing retirement benefits to the SMSF’s members or to their dependents in the event of the member’s death.
- Your SMSF cannot provide financial assistance to a member or relative.
- There are strict rules in respect of the SMSF borrowing funds (such as to purchase property).
There may be also harsh penalties for trustees of SMSFs who breach the rules.
It is strongly recommended that before venturing into any SMSF transactions you obtain specialist advice to ensure the transactions are legal and do not affect the SMSF tax rate.