THE AUDITORS INSTITUTE | FORUM

Archived Forums

When you become a member of The Auditors Institute, you immediately gain access to expertise, advocacy for your profession and peace of mind.

Ask a question in our members-only forum or use the search function to find prior technical discussions on your topic. You can expect a response within 24-48hrs.

Want to become a Member?

Join Now

Already a Member?

Disclaimer

The forum is made available by The Auditors Institute Ltd for the benefit of it’s members only, and its primary purpose is to facilitate education, training, and discussion between members. The information and answers provided within the forum are of a general nature and do not consider any specific circumstances, objectives, financial situation or needs related to the matter/s raised. The responses should not be construed as financial advice, and each Member should seek their own professional advice before making any decisions. The Auditors Institute Ltd and its representatives are not responsible for any actions taken based on the information provided in the forum.

To test this feature, visit your live site.

Stephen Chiang

Jul 05, 2023

in SMSF Technical Forum

I am auditing 2017 to 2022 years and coming across related party loans just about every financial year with principals being repaid in the following year with repeated fresh loans again before the year is up. So the trustee is re-cycling loans and quite openly using the SMSF as cash flow. Accountant has drawn up loan agreements for each year, charged and accrued the applicable interest to prior years' financial statements. Though the principals have been repaid, the interest accrued are still outstanding as at 2022 relative progressively back to 2017. How do I report the contravention of the interest component? Does it form part of the in-house asset calcuation? The outstanding interest component is due to timing problem and cannot be rectified until later on. What if the total outstanding interest component is less than the $30K and 5% reportable threshold?

Your opinion please.

1 comment

Comments (1)

THE AUDITORS INSTITUTE

Jul 06, 2023

Hi Stephen

I will make general comments as do not know the $ amounts involved. I also assume the loans are not direct to a member or relative.

Section 85 of SIS states that a trustee cannot enter into a scheme to avoid the application of the IHA rules. You would need to consider this section.

The interest owing in my view should be added to the loan balance as part of the IHA calculation / test.

You may also have a breach of the sole purpose rule under section 62 of SIS.

You may also have a breach of section 109 of SIS if the interest has not been paid in accordance with the loan agreement.

Yes if the breach is less than 5% & less than $30,000 it may not be a reportable breach.

You need to work through the ACR reporting criteria at: