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Pardeep KUMAR

Apr 03, 2024

S67 - Loan from Member

in SMSF Technical Forum

It is a newly registered SMSF. I am doing audit for 2023. The superfund purchased a comercial property during this financial year. The members have borrowed $10,000 from their family member to put deposit for this property. This amount is liability in the balance sheet with the diction 'Loan from Member'. Total cost of the property is $142,190 (inc $12585 GST). Once the superfund receive refund of the GST of $12,585, the loan from the member can be paid back.

I think this is a breach of s67. The trustees of the fund must not borrow any money or maintain an existing borrowing (not listed as an axception).

Any other breach? please advise.

1 comment

Comments (1)

THE AUDITORS INSTITUTE

Apr 03, 2024

Hi Pardeep

I agree that section 67 of SIS requires that a SMSF must not borrow money. There are exceptions listed in section 67 for certain borrowings re paying for a member benefit, paying a surcharge or purchase of securities. There are also the limited recourse borrowing arrangements covered by sections 67A & 67B of SIS.

In your example section 67 has been breached (assuming it is not a limited recourse borrowing arrangement). There are no other sections of SIS that have been breached in my view.

Thanks

The Auditors Institute