I am auditing a fund where SMSF has invested in NGUT with two members as unit holders (SMSF 40%, two members 30% each). The trust has transferred more amount to the unit holders as distribution ($1192 to SMSF and $9650 to other two unit holders - members). This amount is shown as Beneficiary Loans in unit trust financials.
Is this a breach of the IHA exemptions???
Hi Alkesh
Yes if a Fund invests in a related non-geared trust it (the trust) must not have any loans as assets. (re 13.22C & D of SIS Regulations)
A debit in a beneficiary account could be treated as a loan if it meets the normal concepts of what a loan is. If it relates to distribution being non materially overpaid in error you should be able to argue that this is not a loan.
If you are concerned there may be scope to decrease the units held and decrease the loan amount.
If other members have a view please let the forum know.
Thanks
The Auditors Institute