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During the 2022 financial year, An SMSF has paid or given $10,000 to an unrelated individual who is a director of a corporate trustee - lets call it 'Entity B'. The recipient of this money 'Entity B' has pooled it with other moneys they recieved from other investees and made a total $60,000 investment in 'bluebottle fund' as evidenced by the unit certificate issued by bluebottle fund to entity B which is on file. Now, the important part: I also have on file, a declaration of trust that Entity B is the applicant for the total $60,000 worth of units of which $10,000 was provided by the beneficiary - being the SMSF - that im auditing. This declaration of trust is saying that $10,000 is beneficially owned by this smsf. Does the above sound legal to you in your view SMSFAAA? Would it pass your auditing smell test if you were auditing this smsf?
I was of the view that where an asset/security was able to be legally held in the name of the fund, then it should be where possible. A discussion with the trustee mentioned that the $60,000 was a minimum investment. By the way 'bluebottle' is a fund that invests in cryptocurrency.
Hi Mark
I assume it is a material investment to the Fund.
On an overall basis I do not have an issue with this if the documentation supports that the investment is held in trust for the Fund. I would raise it as a matter of concern for the trustees attention in your management letter.
Relevant sections of SIS to also consider are:
1) Section 109 - investment made on an arm's length / commercial basis.
2) SIS Reg 4.09 - assets of the SMSF must be held separately from any assets held by the trustee personally.
You would need to consider other parts of SIS such as the sole purpose test, in-house asset rules & the investment strategy requirements.
Thanks
SMSF AAA