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Hi,
I have an instance of a Section 66 breach which is not under dispute, which was a residential proeprty acquired by the SMSF from the members.
My understanding is the transaction needs to be reversed, I assume they take it up as a purchase in the SMSF then they reverse it at cost price with the titles office and sell it out?
The property has remained empty which is of benefit but do they need to repay all acqusition costs back to the SMSF as well as any expenses paid?
Otherwise they take up all amounts paid out for purchase and expenss as a sundry debtor to be refunded to the SMSF?
They may be up for stamp duty twice, at least it was onlt $190k property. I also suggested they seek legal advice on the matter.
Thanks
CV
There is no requirement in section 66 that a contravention be rectified (contrast with in-house assets which sets out how a contravention is to be rectified). I have had contraventions which I reported to the ATO, but the ATO took no action and the asset remained in the fund.
On the other hand, it is probably best practice for the fund to sell the property at market value. And if the ATO do get involved, that is what they usually require to settle the case. I agree with the Auditors Institute that the sale should be at market value (not just reversed). If the sale is not at market value, then there may well be further SIS contraventions.
It is interesting that contraventions of section 66 can lead to jail terms for the trustees (section 66(4)).