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The fund I am auditing has a corporate trustee. The fund acquired a motor vehicle which is a collectble. The problem being the registration for the motor vehicle is in the name of the fund member rather than the corporate trustee. Various talks I have heard from lawyers suggest that there can't be a contravention of regulation 4.09A where there is a corporate trustee - as companies cannot hold assets personally. My question is whether this is a contravention of any other SIS provision. Note that for the purposes of the discussion, there are no issues with the application of the regulation 13.18AA collectables rules (eg there is insurancce, it is stored properly, etc).
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Hi Kenneth
My view is that generally most auditors would argue that there is a breach of SIS regulation 4.09A if the motor vehicle can be registered in the name of the company but has been instead registered in the name of a Fund member.
Regulation 4.09A of SIS requires that:
"A trustee of a regulated superannuation fund that is a self managed superannuation fund must keep the money and other assets of the fund separate from any money and assets, respectively:
(a) that are held by the trustee personally; or
(b) that are money or assets, as the case may be, of a standard employer-sponsor, or an associate of a standard employer-sponsor, of the fund."
The ATO gives guidance on Regulation 4.09A of SIS & states at:
https://www.ato.gov.au/super/self-managed-super-funds/smsf-auditors/auditing-an-smsf/compliance-audit/
"The auditor should obtain evidence that the fund’s money and assets are held separately from money and assets held personally by the trustees or a standard employer-sponsor by:
· sighting asset ownership documents, including bank statements, to verify SMSF assets are held in the name of trustees on behalf of the fund (for example, R & J Smith as trustees for the Smith SMSF or R Smith Pty Ltd as trustee for the Smith SMSF) and not in the name of the trustees alone
· where State law prevents ownership in the SMSF’s name, checking for alternative documentation that protects the fund’s assets (for example, a valid declaration of trust)
· reviewing transactions on bank statements to ensure fund money is not mixed with money belonging to related parties of the SMSF.
Where there has been a change in trustees, the auditor should obtain evidence that ownership documents reflect the change."
The SIS regulation 4.09A does refer to "held by the trustee personally". Again generally in my view most auditors see this reference as relating to individual trustees or to directors of a trustee company.
I agree with you that lawyers have argued that "there can't be a contravention of regulation 4.09A where there is a corporate trustee - as companies cannot hold assets personally".
An article that covers this can be found at:
https://www.professionalplanner.com.au/2016/04/the-nitty-gritty-of-holding-assets-in-an-smsf/
It is best practice (& what the ATO expects) that SMSF assets are held in the name of the trustee or trustees on behalf of the Fund. I am not aware of any other SIS sections / regulations that would be breached in your example.
If other forum members have a view on this issue please let the forum know.
Thanks
SMSF AAA