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Stephen Ryan

Jul 25, 2023

Edited: Apr 05, 2024

Unlisted Unit trusts - In -house assets

in SMSF Technical Forum

SMSF has invested with other companies and Trusts that share similar Directors and Trustees in a Unit Trust.

The underlying investment is a commercial property not occupied by a related party.

Looking to confirm that the this type of investment falls within the related party and in-house asset rules and needs to comply with the 5% limit?

2 comments

Comments (2)

Michael Mackenroth

Jul 27, 2023

It is my understanding that the issue relates to who controls the unit trust, not who has invested in it. So if the members of the fund were the only directors of the trustee of the unit trust, then you could well have related party/in-house asset problems.

THE AUDITORS INSTITUTE

Jul 26, 2023

Hi Stephen

I assume the investment was made by the fund post 11 August 1999 when the in-house asset (IHA) rules were amended.

It can be complicated as to whether a SMSF has invested in a related party due to you having to work through the relationships of the parties involved.

Yes if a SMSF invests in a related party (that is an in-house asset) then yes if the asset is greater than 5% of the Fund's assets there will be a breach of section 82 - 85 of SIS.

If the Fund has invested in a related party Unit Trust (or company) that meets the requirements of SIS Regulations 13.22C & 13.22D re the "ungeared" trust / company requirements then the investment can by made by the SMSF.

To be able to comment further I would need more details such as what does the trust own, does the trust have any borrowings, if the Unit Trust does not meet the "ungeared" trust rules is the Unit Trust a related party per SIS.

A great article that goes through these concepts is found at:

Thanks

THE AUDITORS INSTITUTE