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one of my client is a director (1 of 2 director) of company and he owns 49% share (2 shareholder, other shareholder owns 51%) of the same company. Can he invest his SMSF fund into this company?
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Hi Md
Yes a SMSF can invest in an entity that is not a related party. If the entity is a related party the Fund could only invest up to 5% of its assets in the entity due to the in-house asset rules under section 82 to 85 of SIS.
That is yes the SMSF can invest in the company if it is not a related party.
A related entity to the SMSF is any entity that is considered to be majority owned or controlled. To be majority owned or controlled this is normally where the SMSF & its Part 8 associates own more than 50% of the shares of the entity or has greater than 50% of the voting rights.
You would need to consider if the other director is a Part 8 associate under SIS. If the other director is a Part 8 associate then the entity would be considered a related party and the investment would be considered to be an in-house investment.
I also note that there are rules in relation to ungeared entities under SIS regulations 13.22C & D.
Thanks
SMSF AAA