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A SMSF have 2 members and also are trustee of SMSF (Husband & Wife)
This SMSF has investment in the fix Unit Trust
The wife personal name is only trustee of Unit Trust who current holding the property of Unit Trust
The first year register holder of Unit Trust: 50% the wife personal name and 50% Super Fund name
After 5 years, this Unit Trust has issued more units so now the wife holding 67 % Units and Super Fund holding 33 % Units.
1/ I wondering that if original register unit holder equal, can Unit Trust issue units for the wife personal name more than Super Fund unitholder in later? Or always have to issue equal new units?
2/ In current year, Assets of Unit Trust shows the 2nd property (the wife personal name also current holding this property) and Liability shows Loan from another person that amount also approximate value of the 2nd property (there are no money transfer, no issue units in this year)
I wondering whether breach Reg 13.22 C for this case
3/ Please show me what need require for audit super fund if the Unit Trust has the 2nd property?
Much appreciate for your help
Hi Phuong
I understand that a SMSF & a member have invested in a related Unit Trust as they jointly own 100% of the units.
As a starting point if a Fund invests in a related party greater than 5% of its assets it is a breach of the in-house asset (IHA) rules under sections 82 - 85 of SIS (assuming no exceptions exist).
The IHA rules do allow a Fund to invest in a related party if the SIS regulations specifically allows it (refer SIS 71(1)(j). Under Section 66(2A) of SIS a SMSF can acquire units from a related party if it is an asset that is not deemed to be an IHA under the SIS regulations.
It is SIS regulation 13.22C that allows an investment in a Unit Trust to not be an IHA if it meets the criteria including:
* no borrowings
* no interest in another entity
* no charges over assets
As a result if the SMSF you refer to has invested in a related party unit trust that has borrowed this is a breach of the IHA rules as the trust does not meet the requirements of SIS regulation 13.22C.
I also note that there are exceptions in SIS under section 71A if the SMSF invested in the related party unit trust pre 11 August 1999.
Thanks
SMSF AAA