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Kylie Wee

Nov 02, 2023

Acquiring Furnitures under trustee's name and personal address

in SMSF Technical Forum

Hi All,

Hope you are well.

I am currently auditing a fund, which was going to purchase an investment property. However, it failed to meet the requirements of the pest control and building inspection. Hence the settlement was cancelled. Meanwhile, I noted that the trustee member acquired furnitures, which were supposed to be placed in this investment property. Noted that the invoices were billed to the member & delivered to his own personal personal address using the Fund's monies. The cost of the property's furnitures are in the Fund's book in Other assets as of 30 June 2023.

As per my understanding this will trigger the breach of S.52b(2)(d) of SISA and Reg 4.09A of SISR. Could you please share your thoughts on it?

1 comment

Comments (1)

THE AUDITORS INSTITUTE

Nov 02, 2023

Hi Kylie

Yes there is arguably a breach of SIS Regulation 4.09A as Fund assets have not been kept seperate from personal assets. The amount involved may not be a mateial amount so there arguably may be no requirement to qualify the audit report or lodge an auditor contravention notice re the breach.

The audit report does not sign off on section 52B of SIS and you could ignore this section given this and that it is the same rule as in SIS regulation 4.09A.

Given the property has not been purchased I would expect that the trustees would sell the furniture if they are no longer needed.

If the furniture was being used by the member (& no rent being paid) you would have a breach of the sole pupose test under setction 62 of SIS. I would request a declaration that the furniture is not being used by the member. I note that the Fund could rent the furniture to a member if it was an appropriate investment and was under the 5% in-house asset limit (re lease of an asset to a related party other than re business real property).

Thanks

The Auditors Institute