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Signorina Algeri

May 19, 2022

Private Company Non Arms Length

in SMSF Technical Forum

A client has a SMSF which owns shares in a private company. They originally owned ordinary shares and have recently issued different classes of shares so all shareholders receive the same amount rather than the amount they were receiving to the amount of ordinary shares held.

If the shareholders are receiving payments under the new classes of shares does this result in a non arms length breach.

The original shareholding is not a breach as it is in accordance with the % held by each shareholder and any dividends paid in accordance with the ownership.

2 answers1 reply

Comments (3)

THE AUDITORS INSTITUTE

Jun 01, 2022

Hi Signorina

A member / trustee of a SMSF could be an employee of a private company and the SMSF could invest in that company (subject to the in-house asset rules).

If the private company was considered to be a related party then under the in-house asset rules then the Fund could only invest up to 5% of its assets in the private company.

Thanks

SMSF AAA