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Matt Little

Jun 22, 2021

SMSF rental money being received by member

in SMSF Technical Forum

I am completing an audit and the Fund owns a residential property that is always tenanted to persons in receipt of Centrelink benefits. They then use "Centrepay" (which is a free service offered by Centrelink to pay bills and expenses as regular deductions from their Centrelink payments) to pay their fortnightly rent.

The business in receipt of the Centrepay payments are also are required to register with Centrelink. As the member has other non-SMSF owned properties also in receipt of Centrepay payments he has simply nominated himself as the "business", (because a business cannot register more than once with Centrepay), and as such the Centrepay payments for his SMSF rental property are deposited into his nominated Centrepay bank account, which is his personal bank account.

So, three questions:

1. Is there an issue with the SMSF not being the registered Centrepay business?

2. Is there an issue with SMSF rent being paid into the member's personal bank account?

3. Is there an issue with the member not transferring the SMSF rent money across to the SMSF bank account immediately after receiving it? In one instance it took nearly three months to be transferred across.

Thanks.

2 answers0 replies

Comments (2)

Matt Little

Jul 09, 2021

Many thanks.

THE AUDITORS INSTITUTE

Jun 23, 2021

Hi Matt

I have not come across "Centrepay" before.

Re your queries:

Re 1 & 2. - Yes the SMSF or the Trustee (s) of the Fund should be the registered Cenrepay business as it is the owner of the property. As the Fund owns the property the rent should be banked in the Fund's bank account & not the member's bank account. By not having banked the money directly to the Fund's bank account the trustees have breached regulation 4.09A that requires the SMSF to hold separately assets held by the trustee personally.

Re 3 yes arguably the trustees have breached section 65 of SIS by banking the rent in their personal bank account and not immediately paying it to the Fund. Section 65 of SIS requires that no financial assistance (or loan monies) be provided to a member or relative.

Thanks

SMSF AAA