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Jan Mohammed

Aug 13, 2023

Reg 13.22c investment

in SMSF Technical Forum

I have a client which has invested in Reg 13.22c Unit Trust - no issues there.

It has also invested in a private company which has commercial and residentail properties as an investments. The members are the directors of this company. There are no loans in this company. All rental income and expenses are on an arms length basis. Tenants are not related parties. The member says this company is a Reg 13 .22c investments as well. The company pays fully franked dividends to the SMSF. And the SMSF is in full pension mode.

Questions are:

Is there a NALI issue;
Can Reg 13.22c apply to private companies;
The company pays tax for the dividend to be fully franked and the franking credits are claimed by the SMSF which is in pension mode. Don't know why it was set up like that. So there is no net tax foregone by the ATO. Are there any issues with this structure and how can it be fixed?
Can we establish a Unit Trust under the company to fix this issue?

2 comments

Comments (2)

Michael Mackenroth

Aug 16, 2023

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.