Tony Negline writes an article for the website The Australian Business Review wherein he talks about the impact of dipping into the SMSF; too deep or too soon. Such ‘dipping’ generally comes in the form of loaning out money to relatives or members of the fund.
Funding relatives through SMSF assets
The businesses you are looking to revive through SMSF assets fall through anyway in the course of time and in addition, you have to tackle various fines and penalties because of possible compliance breaches.
Millars- a case in point
The recent example involving the Millars is a case in point. The Millars had unskaeable faith in their accountant who proposed a property purchase via SMSF. The Millars failed to counter the ATO’s argument that the transactions were valid. Negline digs deep into the issue and suggests that relying blindly on your adviser may not be the best route to take. SMSF is an investment vehicle but one where the legal compliances are extremely crucial to observe.
You can read the original article here.
The Millars case emphatically suggests why it is important not to be carried away too far when it comes to investing through your SMSF. SMSF is a new player in the Super fund arena and it is an unregulated market. Because of lack of prudential regulations, limited recourse borrowing arrangements involved in the SMSF world has already been panned a fair bit by the critics.
Government disagrees with the FSI recommendations
While the government has shown a red signal to the recommendations made by the Financial System Inquiry (FSI), it has declared post haste that the recommendations are valid. The government feels that the recommendations are not proportional to the threat involved and a few more years must pass before the government actually sits down to decide the fate of limited recourse borrowing arrangements.
Ignore SMSF compliance at your own peril
This said, there are many compliance protocols which need to be observed. These include, but may not be limited to, in-house asset rules and arm’s length transactions. If you are confused about a compliance guideline, you will do well not to ignore it. Feel free to join me at SMSF Advice Hub.