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Dawood Hassan

May 01, 2024

Residential properties held in a Unit Trust with two relates Unit holders.

in SMSF Technical Forum

Hi there,

I hope you're doing well.

I have a question about a potential situation. In this scenario, a residential investment property is held under a Unit Trust, with both members of the SMSF owning 50%, and the remaining 50% units owned by the SMSF itself. At the end of the year, 50% of the profit is allocated to the SMSF. However, there is no cash left in the Unit Trust's bank account to be transferred to the SMSF because the individual unit holders are withdrawing all the cash. Consequently, the value of the SMSF's share in the Unit Trust is increasing while the share of the individual members is gradually decreasing. It appears to me that the SMSF is effectively buying the shares of the related individual unit holders. Could this be considered a breach of Section 66?

Additionally, is there a requirement to transfer the share of profit to the SMSF each year?