Hi,

It is my understanding that the NALI process relates to the transaction and not the parties. I believe the ATO would be interested in how much was paid for the shares and what the level of dividends are. Paying $2 for a share and receiving a $100,000 dividend is likely to attract attention.

Hi Jan

Yes SIS regulation 13.22C applies to a SMSF that has invested in a related party ungreared unit trust or a related party ungeared company as long as the rules are followed as noted in the below legislaion.

There is no NALI issues if all the revenue, expenses, asset sales, assets purchased transactions are all done on an arm's length basis.

Yes a 13.22C company could pay tax on dividends and pass franked dividends to shareholders.

As the comapny can be set up to pay franked dividends this can occur.

If any other member wants to add a view please do so.

Thanks

THE AUDITORS INSTITURE

SUPERANNUATION INDUSTRY (SUPERVISION) REGULATIONS 1994 - REG 13.22C

Assets acquired after commencement of Division 13.3A (Act s 71)

             (1)  This regulation applies to an asset of a superannuation fund that:

                     (a)  is an investment in a company or unit trust; and

                     (b)  was acquired by the fund on or after the commencement of this Division; and

                     (c)  is not affected by subregulation 13.22D(3).

             (2)  For subparagraph 71(1)(j)(ii) of the Act, the asset is not an in-house asset of the superannuation fund if, w hen the asset is acquired:

                     (a)  the superannuation fund has no more than 6 members; and

                     (b)  the company, or a trustee of the unit trust, is not a party to a lease with a related party of the superannuation fund, unless the lease relates to business real property; and

                     (c)  the company, or a trustee of the unit trust, is not a party to a lease arrangement with a related party of the superannuation fund, unless the lease arrangement:

                              (i)  is legally binding; and

                             (ii)  relates to business real property; and

                     (d)  the company, or a trustee of the unit trust, is not a party to a lease, or lease arrangement, with another party in relation to an asset that is the subject of another lease or lease arrangement between any party and a related party of the superannuation fund (unless the asset is business real property); and

                     (e)  the company, or a trustee of the unit trust, does not have outstanding borrowings; and

                      (f)  the assets of the company or unit trust do not include:

                              (i)  an interest in another entity; or

                             (ii)  a loan to another entity, unless the loan is a deposit with an authorised deposit-taking institution within the meaning of the Banking Act 1959 ; or

                            (iii)  an asset over, or in relation to, which there is a charge; or

                            (iv)  an asset that was acquired from a related party of the superannuation fund after 11 August 1999, unless the asset was business real property acquired at market value; or

                             (v)  an asset that had been at any time (unless it was business real property acquired by the company, or a trustee of the unit trust, at market value) an asset of a related party of the superannuation fund since the later of:

                                        (A)  the end of 11 August 1999; and

                                        (B)  the day 3 years before the day on which the fund first acquired an interest in the company or unit trust.

             (3)  In subparagraphs (2)(f)(iv) and (v):

"asset " does not include:

                     (a)  money; or

                     (b)  in relation to a company, a share in the company.