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Campbell McCart

Jan 30, 2024

in SMSF Technical Forum

Jim and Sue Fin are members of the Fin Super Fund. The fund has total assets of $320,000.

Jim is also a Director of Bright Light Pty Ltd. There are four other Directors of Bright Light Pty Ltd. All five Directors when it comes to voting have equal rights. Bright Light Pty Ltd is an Unlisted Company. Bright Light Pty Ltd has issued share capital of $10,000,000.

Fin Super Fund has an investment of $160,000 in Bright Light Pty Ltd. This represenents 50% of the funds assets. Fin Super Fund investment in Bright Lights Pty Ltd represents 1.63% of share capital. The super fund does not have the capacity to control the company.

My questions have to deal with S 66, Related Party and In House Asset

Question 1

Is Bright Light Pty Ltd a related party to Fin Super Fund because Jim is a Director.

My opinion is No. This is because Jim /Fin Super cannot sufficently influence the company or has a majority voting interest. That there is no breach of S 66 and no Part B Qualification needs to be reported.

Question 2

Have the In House Asset rules been breached under S66.

My opinion is No. A. Becuse no Related Party Relationship exists as per question 1 above.

That there is no breach of the 5% in house asets rule based on the ability to control Bright Light Pty Ltd.

Please provide your opinions and if I am incorrect provide sections that are are breached and do they require a contravention to be lodged.

1 comment

Comments (1)

THE AUDITORS INSTITUTE

Jan 31, 2024

Hi Campbell

I agree with you that Bright Light Pty Ltd on face value is not considered to be a related party so there is no breach of the in-house asset rules.

Jim is only 1 of 4 directors so he does not control the company. The Fund only owns 1.63% of the company so it does not own more than 50% of the company so as you note the Fund does not have the capacity to control the company.

You do have to consider the part 8 associate rules of the SIS legislation. That is are the other directors of Bright Light Pty Ltd related to Jim or Sue Fin. You also need to consider if Jim or Sue are partners in a partnership with the other directors.

Thanks

The Auditors Institute