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M. J.

Apr 08, 2024

Unit trust structures

in SMSF Technical Forum

Please refer to the diagram below. Could you please suggest how this arrangement can be structured so that there is no breach of the in-house assets rules?

Is there a way that A1 and A2 can be deemed to not control the unit trust?
The Z Unit Trust property has been purchased with this structure today (for example). Could there be an IHA issue for AA Super Fund ?
Will changing the structure of the unit trust (eg. Removing trustee A2) before 30 June 2024 address any IHA issue?

Thanks

1 comment

Comments (1)

THE AUDITORS INSTITUTE

Apr 09, 2024

Hi M.J.

A SMSF can only invest up to 5% of its assets in "in-house assets". In-house assets include a Unit Trust investment where more than 50% is owned or if the entity is considered a controlled trust. I note that there are exceptions to the in-house asset rules for non-geared Unit Trusts but assume in your example you are referring to a geared trust.

Re your questions:

If A1 & A2 are 2 of the 3 trustees of Z Unit Trust this would make it a controlled Trust.
Yes if AA Super Fund invest in Z Unit Trust and it is a controlled trust then this would be an investment in an "in-house asset".
Yes if A2 was not a trustee of the Z Unit Trust you could argue that it is no longer a controlled Trust and no longer an "in-house asset".

A great summary of the "in-house asset" rules re Unit Trusts can be found at:

Thanks

The Auditors Institute