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This client had investment into an unlisted company which SMSF owns 49%, recently they sold the SMSF ownerships of this company to the individual members at the market value based on their account prepared financials. The funds received the sales money in June 2023, however when we asked the client to provide the supporting documents for the sale of shares such as the updated ASIC registration of this company a few weeks ago, they provided a current ASIC with the share transfering date of 13 Nov. 2023. Are there any contravention or breach here?
Thank you in advance,
Jennifer
As long as the transaction is at arms length, the SMSF has not contravene. Perhaps, the shares in the unlisted company should bde professionally valued.
Hi Jennifer
If the shares have been sold at market value I would say there is no breach of SIS. This should be the focus of your audit testing in that the shares were sold on an arm's length basis and the consideration correctly received. The shares value may be different to the value based on the financial statements so this will need to be reviewed to determine if the value paid was an amount that would have been paid if the 2 parties were dealing with each other on an arm's length basis.
It is noted that there is nothing in SIS that prevents a SMSF selling an asset to a related party (other than the rules re collectables). The sale just has to happen on an arm's length basis.
The ASIC update re the shares is the responsibility of the company and not the Super Fund.
Thanks
The Auditors Institute