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HI,
I have a fund that has a "in-house loan" to the members (not documneted, interest at DIV 7A Rates)
The funds accountants is adamant it is ok as it is below the 5% in house asset limit
Is he correct?
Toby
(I'm sure I know the answer)
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Hi Toby
Section 65 of SIS requires that:
"The trustees must not loan monies or provide financial assistance to any member or relative at any time during the financial year".
A loan to a member of relative is a breach of SIS section 65.
The in-house asset rules are covered by section 82 - 85 of SIS. A loan to a member may not be breach of the in-house asset rules if less than 5% of the Fund's assets but will still be in breach of Section 65 of SIS.
If you have a breach of section 65 and it is less than 5% of the Fund's assets you can consider materiality as to whether a qualification is required in the Part B Audit report. You also need to work through the Auditor Contravention Report (ACR) guide to see if you are required to report the breach to the ATO.
Thanks
SMSF AAA