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.

Jason G

Apr 16, 2024

Investment in Private Company - IHA?

in SMSF Technical Forum

A client has proposed the following scenarios:

Scenario 1:

Company A will operate a business.
The SMSF member will work for that business and be one of two directors.
50% of company A would be owned by the SMSF member's own company (Company B) and 50% of Company A will be owned by an unrelated company (Company C).
The SMSF will own minority shares in company B.

Is it correct to say the SMSF's investment in company B is an in-house asset, given company B is owned and controlled by the SMSF member?

Scenario 2:

Company A will operate a business.
The SMSF member will work for that business and be one of two directors. Company A ownership: 30% SMSF member's own company 20% SMSF itself 50% Unrelated party

Is it correct to say that in scenario 2, this is not an in-house asset or breach of sole purpose test?

1 comment

Comments (1)

THE AUDITORS INSTITUTE

Apr 18, 2024

Hi Jason

Re scenario 1 Company B is an in-house asset as it is 60% owned by the member.

An in-house asset is an investment in a related party. A related party includes a Part 8 associate of a member. Refer section 70B of SIS that includes a Part 8 associate of an individual where "a company that is sufficiently influenced by, or in which a majority voting interest is held".

Re scenario 2 yes if 50% or less of the company are owned or controlled by the SMSF / member / part 8 associates that would mean it is not an in-house asset. Please refer sections 71 to 85 of SIS that cover the in-house asset rules.

Thanks

The Auditors Institute