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Feb 20, 2024

Reg. 4.09A Separation of Assets

in SMSF Technical Forum

In Victoria property contract was signed to the view that loan will be obtained.

However, SMSF cash was used to settle property with no loan.

Title of the property lists corporate entity which was set up for custodian trustee as sole owner.

Effectively it created breach of Reg. 4.09A.

My question, is this situation can be fixed ?

Fund has corporate trustee already.

This other corporate entity (supposed to be custodian trustee ) which now owns the property, can it be appointed new corporate trustee ? and retire existing corporate trustee.

Or do you have any other alternative to solve problem ?

What are the stamp duty implications, if at all.

I argue beneficiary being both member/directors are same in both corporate entities, in Victoria.

5 comments

Comments (5)

Kenneth Turner

Feb 23, 2024

The SIS Act allows an asset to be held by a custodian. So as long as there is proper documentation evidencing the custodian relationship, I do not think this is a contravention of regulation 4.09A.

Kenneth Turner

Feb 24, 2024

Replying to

It is common for assets to be held in a custodian relationship in SMSFs. For example, many wraps are a custodian relationship where the assets are held in the name of the custodian, not in the name of the fund. Clearly the ATO do not consider wraps to be a contravention of reg 4.09A.

As long as there is documentation evidencing the custodian relationship, there is no contravention of reg 4.09A. There is also no problem with a custodian relationship in terms of the notes from the ATO website. In a custodian relationship the assets are clearly distinguished from personal and business assets. And the custodian documentation (if drawn up correctly) clearly shows the legal ownership by the fund.