COMPLIANCE
Related restrictions
SMSF transactions involving related parties invoke a significant number of additional compliance restrictions that have considerable adverse consequences if breached. Liz Westover details the relevant definitions and the related rules.
LIZ WESTOVER is partner and national SMSF leader at Deloitte.
SMSFs are able to invest in an almost limitless array of assets and, in most cases, there are few rules hindering the manner in which they do so except when related parties are involved. Once this occurs, investment rules become far more restrictive, with a raft of legal requirements coming into play. Nevertheless, related-party dealings are commonplace in SMSFs so advisers need to have a solid grasp of who or what a related party is together with when and why it matters.
When does it matter? The two key rules of which to be aware with respect to related parties involve the acquisition of assets and
36 selfmanagedsuper
in-house assets (IHA). Section 66 of the Superannuation Industry (Supervision) (SIS) Act 1993 prescribes a general prohibition on the intentional acquisition of assets by a trustee, or their investment manager, from a related party. A number of exceptions exist, most notably business real property, listed securities, certain IHA (acquired at market value and not causing a breach of the permitted level of IHA) and upon relationship breakdowns. Understanding which are the ‘certain’ IHA is important as the exception covers a broader range of assets other than those defined in section Continued on next page
