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Dawood Hassan

May 17, 2021

shares purchased mistakenly in smsf when not enough funds available in the fund

in SMSF Technical Forum

A SMSF bought shares worth $50000 mistakenly in Feb 2020 ( member of the fund was buying shares in personal name but ended-up buying shares in super fund). The online stockbroking platform let the transaction go through even though there were not enough funds available in the super fund bank account. The client had to transfer fund from his personal bank account to super fund bank account after he was contacted by the stockbroking firm for not having enough funds. The share market was low and he did not sell shares until May 2021 when it was on breakeven, shares were sold and loan was returned back to the member of the fund.

total assets value of the fund before the purchase of purchased around $60k I am in the process of audit of 2020, looking forward to an answer if I need to lodge a contravention report under s67 borrowing by the fund or a note in the management letter is enough. I will really apricate it if someone can reply

Thanks

2 answers0 replies

Comments (2)

Dawood Hassan

May 17, 2021

Thanks for the reply. highly appreciated. The value of the loan is $50,000. The reason it took so long to rectify the error because the share value went down significantly and the member waited for the market to bounce back.

THE AUDITORS INSTITUTE

May 17, 2021

Hi Dawood

My view is that you would qualify the audit report in relation to a breach of regulation 4.09A of SISA in that SMSF assets have not been held separately from assets held by the trustee personally. As the amount is over $30,000 you would also report it to the ATO by lodging an audit contravention report (ACR). In the ACR you would advise the ATO how the breach has been rectified.

In relation to the loan you have not advised the amount of the loan. Assuming the loan is material I would also qualify the audit report in relation to section 67 of SIS as a Fund could not borrow in this way. Further the ACR should refer to the breach of section 67.

I also would question why it took so long for the breach to be rectified and would query if the Fund has also breached section 65 of SIS by possibly providing financial assistance to a member.

It would be great to get other members views in relation to the breach / breaches.

Thanks

SMSF AAA