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Catherine (kate) Taylor

Dec 16, 2022

Unit trust with 2 SMSF unit holders - equal holdings

in SMSF Technical Forum

We are auditing 2 super funds with equal holdings in a unit trust. In past years we have not considered the unit trust a related party as the SMSFs are not related and neither has control. This year things are looking a bit unusual with one SMSF being overpaid $300,000 which has been recorded in the SMSF as a creditor. The unit trust accounts do not reflect this amount. The SMSF also does not show the $410,000 distribution receivable which the UT account show, the income is there but not the debtor. Also, the unit trust has loaned an equal amount of $210,000 to each member of the 2 SMSFs.

My problem is, if neither SMSF has control and therefore the unit trust is not a related party then how do I qualify the fund? It obviously is not looking above board - do I use my judgement and assess the unit trust is actually related due to the nature of the issues?

Any feedback would be appreciated!

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

Dec 19, 2022

Hi Kate

Thanks, there seems to be a number of issues.

In relation to the Unit Trust lending money to the members of each Fund this may be a breach of section 85 of SIS that states trustees cannot enter into a scheme to get around the in-house asset rules. An option is to refer to this in your management letter and then qualify your audit report and lodge an ACR re this section.

The Unit Trust lending money to members could also arguably be a breach of section 62 of SIS that requires the Fund be maintained for the sole purpose of providing retirement benefits for members.

In relation to the Fund's accounts not taking up the distribution owing this may lead to a financial audit report qualification. You state that the income has been recognised but not the debtor so I would need to understand how the accounting was done to comment further.

Thanks

SMSF AAA