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Unit trust A with corporate trustee contracted to purchase a residential property with development potential. Bank loan not available at this time to Unit trust A for purchase . All units in Unit Trust A are held by a discretionary trust at the moment with C & D as members. A SMSF formed by C&D will purchase 80 % of units in Unit Trust A with SMSF funds and is allowed since Unit trust A is not geared. The question is after some time when loan is available to discretionary trust, can SMSF sell back the 80 % units back to discretionary trust at the market values of units of Unit Trust A. Unit trust A will remain in geared all the times.
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Hi Antony
The SIS legislation does not disallow a Super Fund selling assets to related parties (other than there being specific SIS requirements in relation to the sale of collectables to related parties).
That is a Fund can sell the units in a unit trust to a related party if the units are sold at their market value.
There are however sections of SIS that as auditor you will need to ensure have not been breached by the sale transaction being:
1) Section 62 - sole purpose test.
2) Section 65 - trustees cannot provide financial assistance to members.
3) Section 109 - investment transactions must be made and maintained at arms-length.
Thanks
SMSF AAA